Businessbrief June 2016 by The Da Vinci Institute

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BusinessBrief

TAX HAVENS! P

IT TOOK EIGHT DENTISTS TO CHANGE THE FACE OF THE PROFESSIONAL INSURANCE WORLD.

1941. War is tearing the world apart. Eight South African dentists realise that the risk of incapacity – and therefore the loss of their livelihood – is severe.

75 Years on, that same value – mutual benefit – is still at our core. We pride ourselves on understanding the world, needs and wants of graduate professionals, and taking solutions to their needs. Because that’s the world that created us in the first place.

Non-sovereign jurisdictions ctions Non-s overei gn jurisdi commonly labelled as tax tax comm only labelle d as havens include: haven s includ e: Jersey Jerse y Isle of Man Isle of Man British Overseas Territories ries Britis h Overseas Territo Bermuda Berm uda British Virgin Islands s Britis h Virgin Island Cayman Islands Caym an Island s Puerto Rico Puert o Rico Seychelles Seyc helles Panama Pana ma British Virgin Islands s Island Virgin h Britis Bahamas, Baha mas, Bermuda, Berm uda, Cayman Islands, Caym an Island s,Netherlands Antilles les Antil rlands Nethe

capital gains tax rate, and $21 tril r R ic hlion t o Th e Su $32pe tril lion hidden in tax havens worldwide.

WHAT MATTERS, MATTERS

But they’re graduate professionals. Smart thinkers. So they come up with an innovative solution. Pool their resources, for the greater good of all. And so PPS is born.

PAPER A M A AN

Histo ry betw een two or more The use of differ ing tax laws tax liabili ty is prob ably coun tries to try to mitiga te nt Greec e, some of Ancie In . itself Lost Tax Revenue as old as taxat ion used as depo sitori es by the the Greek Islan ds were Poster good s totax aut horiissued by t hen British foreig their place sea trade rs of the era to by the cityimpo sed tiest ttax o counter of fshore taxmay evasion. The Tax thus avoid the two-p ercen ice pract The s. rted good state of Athe ns on impo avoid -t hat global the Justice Networ k estimated gh throu e inenc prom have first reach ed later the stapl e ports tax and revenue lost t o tax havens is between ance of the Cinqu e Ports centu ries respe ctivel y. in the twelfth and fourt eenth ica Amerbil Latin from d US$190 bil lion and $255 lion per year, trade ies colon ican In 1721, Amer to avoid Britis h taxes assuming a 3% capital gains rate, a 30%

Incentives for nations to become tax havens: to become a tax haven: There are several reasons for a nation to charge as much as need not do they d n fi may ns o nati Some to be earning them for order n i s e i countr ed z i l a some industri may offer a Some s. budget annual r thei for sufficient income for the e exchang n i ns, o rati corpo rger lower tax rate to la company in the host companies locating a division of their parent of the local population. Other country and employing someAVOID

Base Erosion and Profit Shifting

“A more recent study by the London Zuc man estimated the rielEconomics y by Gabof mor e rece nt stud School ics esti amount ofnom global cross-border wealth held of Eco ool of the Lond on Sch rder the Netherlands cros s-bo inglob tax alhavens (including mate d the amo unt of the ng ns (inc ludi and Luxembourg as tax havens for this wea lth held in tax have ourg as tax have ns Neth erla nds and Lux emb

ANCE vs EVASI ON “A

$ 13 ,4 7 3, 6 5

loopholes 8 7 .0

$1 3,4 73 ,65 7. 08 TRAVEL & LEISURE 7

BIG SKY SAFARI COUNTRY CORNER GETAWAY 49

GIVEAWAY

HUAWEI MATE 8

Lower Tax Rates Lo wer Ta x R at es Incentives for nations to become tax havens:

s for a nation to become a tax haven: lereasons There o are several loo ph

FEATURE

GREEN BUSINESS

For more inspirational stories like this, visit pps.co.za

Investments

Financial Planning

Short-Term Insurance

Medical Aid

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June/July 2016

Life Insurance

Some nations may find they do not need to charge as much as some industrialized countries in order for them to be earning sufficient income for their annual budgets. Some may offer a lower tax rate to larger corporations, in exchange for the companies locating a division of their parent company in the host country and employing some of the local population. Other

8 118,326

Ba se Er os ion an d Pr ofit Sh ift ing

History The use of differing tax laws between two or more countries to try to mitigate tax liability is probably as old as taxation itself. In Ancient Greece, some of the Greek Islands were used as depositories by the sea traders of the era to place their foreign goods to thus avoid the two-percent tax imposed by the citystate of Athens on imported goods. The practice may have first reached prominence through the avoidance of the Cinque Ports and later the staple ports in the twelfth and fourteenth centuries respectively. In 1721, American colonies traded Tax Reve nue from Latin America to avoid BritishLost taxes

Ju ri sd ic ti on s

Cross Border Transactions

WILL THE BUBBLE BURST?

Poster issued by t he Briti sh tax aut horiTax ties t o count er of fshor e tax evasi on. The l globa hat t ated estim k or Netw ce Justi tax reven ue lost in 2012 t o tax haven s is betwe en US$ 190 bil lion and $255 bil lion per year, assum ing a 3% capit al gains rate, a 30% capit al gains tax rate, and $21 s tril lion t o $32 tril lion hidde n in tax haven world wide.

Abuse e,2 12 ,4 06 .2 1 7 05 Ab9,us $ 54

E-SIGNATURE EXCEPTIONS!0 5 ,2 12 ,4 0 6 .2 1 $ 5 4 9 ,7 SKILLS CUTTING BEHEADS THE FUTURE? ARE TODAY’S UNIONS FOR TOMORROW? WOMEN & YOUTH ACCELERATE GROWTH! June/July 2016 Vol 21 No. 3

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Other African Countries R47.40 (excl.tax)

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FINISH

If money talks, what would it say about your bank?

CONTENTS

BusinessBrief

June/July 2016

REGULAR SECTIONS VIEWPOINT

ASSETS & INVESTMENTS

n POLICY IDEAS FOR GROWTH?

n LEARN FROM BATMAN!

n ENTERPRISE & SMME DEVELOPMENT

n M&A OPPORTUNITIES AVAILABLE!

MANAGEMENT

BANKING & INSURANCE

RE TODAY’S UNIONS FOR TOMORROW? nA

nC ASH, TRADE & SECURITIES CONNECT

n SHARES REWARD?

n TRUSTEE APATHY TAKES TOLL!

EDUCATION & TRAINING

MARKETING & SELLING

n SKILLS CUTTING BEHEADS THE FUTURE?

n EMBRACE A YOUNG, DIGITAL WORLD!

n EMBRACE ONLINE EDUCATION

n GO DIGITAL FOR THE RIGHT REASONS

LEGAL

HUMAN CAPITAL

n E-SIGNATURE EXCEPTIONS!

n WOMEN & YOUTH ACCELERATE GROWTH!

n JAIL FOR COMPETITION’S ACT!

n EMPLOYER’S RIGHT TO LOCK OUT?

TAX 46

INFORMATION TECHNOLOGY

n TAX HAVENS: WILL THE BUBBLE BURST?

n ECONOMY’S IMPACT IN ICT

n TAX QUESTIONS TO ASK

n CLOUD SOLVES IT HEADACHES

FINANCE & EQUITY

PROCESS & OPERATIONS

n KING IV & EXECUTIVE REMUNERATION

n THE POWER OF CONNECTEDNESS

n THE TOOTH FAIRY FRAUD?

n ROBOTICS DRIVES NEXT GENERATION

COVER STORY

FEATURE

TAX HAVENS: WILL THE BUBBLE BURST?

GREEN BUSINESS: TURN GREEN TO GOLD

OTHER SECTIONS BRIEFCASE

nA LL THE LATEST GADGETS, GIZMOS AND OFFICE MUST-HAVES GIVEAWAY

n ALL THE LATEST EVENTS CONTRIBUTORS 80 7

n HUAWEI MATE 8

TRAVEL & LEISURE

SEMINARS & CONFERENCES

nC ONSULT OUR CONTRIBUTORS DIRECTLY FOR PROFESSIONAL ADVICE

n EXQUISITE LOCAL EXPERIENCES

Subscribe to BusinessBrief online: www.bbrief.co.za

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June/July 2016

EDITOR’S NOTE

ur world is a shared experience, fractured by individual perspectives. Imagine if we could all feel understood? In an age of ignorance, where the era of enlightenment seems so long ago, almost forgotten, knowledge shines.

We have access to an unlimited store of knowledge but also to an unlimited store of ignorance. Filtering out the knowledge from the ignorance is a massive task because there are so many conflicting and contradictory voices, all vying for our attention. What are governments and private companies doing to ensure that everyone pays their fair share of tax? Our cover story, Tax Havens: When Will the Bubble Burst? by Louise Vosloo takes a closer look at the issue of tax havens – how they’re utilised by companies and individuals to stash their cash in low tax jurisdictions. Often this is done above board, with all the necessary processes being followed; but, it is also being used illegally, by clandestine organisations to launder and hide their cash and investments. Countries and corporations have finally woken up to the benefits of going “green” – building sustainable organisations and institutions that have a low impact on the environment, sustaining themselves with cost-saving energy and facilities management solutions. In this edition’s feature article, Green Business, we examine what businesses should be considering in order to smoothly adjust, adapt and reconfigure their processes in order to be considered “green”. Issues surrounding unions has been burning for years and there does not seem to be any end in sight for what unionised workers want and what their employers are prepared to offer. Businesses exist to make profit, but that shouldn’t be at the expense of workers who are unable to feed, clothe and shelter themselves. Unions are protesting for multiple reasons, especially about their retirement funds being squandered by the institutions that manage their money. Johan Botes walks us through the minefield in his article, Are Today’s Unions for Tomorrow? South Africa needs a second exchange to further develop the capital market. A simplified and flexible exchange for small businesses would be ideal to promote more investment and assist them in crossing the accessibility barrier of financial trading. Advocate Fay Mukaddam delves into this topic in her article, An Alternative Exchange? It is essential that our economy embraces women and the youth in order to grow. For far too long, our patriarchal system has kept these critical demographics from participating rigorously in business activities. Mamphele Ramphele argues this point in her article, Women & Youth Accelerate Growth! and maintains that greater coordination and cooperation is required between government and the private sector – forming partnerships that foster women and young job seekers. The era of robotics is rapidly altering the work landscape and greater automation will mean that organisations can scale faster, enter more markets and become more fluid and responsive to customer needs. Rajesh Segal explains some of the advantages for businesses that robotics will bring to revitalise their processes in his article, Robotics Drives Next Generation. These are extraordinary times for South Africans. The corrupt coils of the snake are wound tight around SA’s torso, and the fight for freedom and democracy is gathering pace. The pepper spray currently being used against the forces of corruption is weak and slow and will not ward off the danger for long. We need to be armed with the right knowledge so that we can take a stand against those wishing to leech off our hard work. The collective knowledge from the thought leaders gathered in these pages is just the kind of panacea that business leaders need to equip themselves with in order to stand strong against the incessant march of the corrupted. n

Nicholas

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BusinessBrief

June/July 2016

PUBLISHER’S NOTE

THE TEAM

CPD/E

PUBLISHER James Scott james@bbrief.co.za

ADVERTISING SALES Janine Levy janine@bbrief.co.za

EDITOR Nicholas Harland editor@bbrief.co.za

James Scott james@bbrief.co.za

The following organisations, subject to individual requirements, have accredited BusinessBrief for purposes of CPD/E (Continuing Professional Development/Education)

TECHNOLOGY & GADGETS Steven Ambrose steven@strategyworx.co.za Tel: 083 601 0333

DESIGN & LAYOUT Bryan Maron Design Bandits bryan@designbandits.co.za Tel: 083 460 3633

OFFICE MANAGER/ SUBSCRIPTIONS Lucia de Andrade admin@bbrief.co.za

COVER DESIGN & CONCEPT James Scott Bryan Maron Cover image: Shutterstock

PRINTED BY United Litho (JHB) Tel: (011) 402 0571

CONTRIBUTORS Please see our list of contributors on page 80

Association of Accounting Technicians South Africa

Association of Chartered Certified Accountants

Federation of African Professional Organisations

Chartered Institute of Management Accountants

Chartered Secretaries Southern Africa

Chartered Marketer South Africa

Compliance Institute Southern Africa

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

Southern African Institute for Business Accountants

South African Institute of Professional Accountants

South African Institute of Tax Practitioners

South African Payroll Association

Southern African Society for Quality

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EDITORIAL: Articles are published at the editor’s discretion, and are not linked to the payment of any consideration or to any obligation to place advertising. ADVERTORIAL: Published for a consideration, this material is provided by the client and does not necessarily reflect the views of the publication. It includes profiles, features, white papers, case studies, and thought leadership pieces. SPONSORED EDITORIAL: Written by an independent journalist, this material is published for a consideration, and includes profiles, features, white papers, case studies, and thought leadership pieces. Editorial contributions are welcome, but the publisher cannot accept responsibility for unsolicited material. The editor reserves the right to alter or cut copy. Copyright: BusinessBrief Publishing (Pty) Ltd. All rights reserved. Requests to lift material should be made to the editor. While every effort has been made by the publisher to ensure the accuracy of the information contained herein, the publisher and its agents cannot be held responsible for any errors, or loss incurred as a result. The publisher advises that readers consult their financial and professional consultants before acting on any information. All material used has been submitted with the understanding that it is original, and the publisher accepts no responsibility for any misrepresentation in this regard. No consideration is accepted for any editorial published. Published articles are not linked to the placement of any advertising.

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BRIEFCASE

LENOVO THINKPAD X1 YOGA ThinkPad X1 Yoga is incredibly thin at just 0.66 inches and light at only 1.3 kilos. It is also the world’s first convertible featuring an optional Samsung OLED display that reproduces beautifully rich colours and deeper blacks. With a patented Lift and Lock keyboard that retracts keys in tablet mode, X1 Yoga also features an active pen that is perfect for highlighting and writing notes directly on webpages using the Microsoft Edge browser. The pen is also housed & charged inside the system so it won’t get lost. For all the details: www.lenovo.com/mp/x1/

APPLE IPAD PRO 9.7 The new iPad Pro 9.7 may just be the computer you have been waiting for. All the legendary attributes of the iPad with doc able keyboards and the Apple Pencil stylus. The iPad Pro 9.7 features a desktop comparable processor along with video performance and screen resolution that many don’t even approach. The new A9X processor coupled with 10-hour battery life and the smart keyboard may just make this the ideal laptop replacement. For more information: www.apple.com/za/ipad-pro/

ASUS VIVOSTICK MICRO PC The Asus VivoStick is a pocket-sized PC that turns any HDMI display or TV into a Windows PC or smart TV for work or play. VivoStick is powered by an Intel® Atom™ processor with 2GB RAM, and has 32GB of on-board storage space. Despite its compact size, it has 802.11ac Wi-Fi, Bluetooth® 4.1, USB 3.0 and USB 2.0 ports, an HDMI port and an audio jack, plus an internal cooling fan to guard against overheating. VivoStick is an affordable and space-saving PC that is ideal for the home or office. Available shortly from retailers countrywide. For more information: www.asus.com

BRIEFCASE

BusinessBrief

June/July 2016

LG SIGNATURE OLED 4K TV GIVEAWAY

LG’s Signature 4K OLED TV is a technological marvel, capable of displaying some of the finest picture quality I have seen. The revolutionary technology found in the 4K OLED TV is unique and possibly the future of Television, featuring 4K resolution and HDR, along with self-illuminating OLED’s, this new range is at the cutting edge of TV science. With colours and contrast that have to be seen to be believed. Couple this with LG’s easy to use smart webOS 3.0 operating system, Harman Kardon developed sound, along with an incredibly slim profile. you have a TV that will do your Livingroom proud. The new LG OLED TV is available in 55”, 65”, and 77”.

For a chance to receive a

For more details: www.lg.com/za/oled-tvs/main.jsp

• Annelie Smuts of Brackenfell –

Huawei Mate 8, please send an email or postcard (one entry per person) with your name, physical address and telephone number marked “Huawei Mate”. Please note that this giveaway is only open to our South African readers. Email: editor@bbrief.co.za Postcard: P.O. Box 1546, Parklands, 2121 Closing date: Wednesday, 20 July 2016 Congratulations to last edtion’s entrant: HP Laserjet Pro

GIVEAWAY

HUAWEI MATE 8

The Huawei Mate 8 is clearly the business persons’ ideal companion, featuring premium build with a class leading FHD 6” screen in a solid aluminium unibody. The Mate 8 features the latest mobile phone technology with the Kirin 950 chipset and tons of memory with 32 or 64GB versions. The lightning fast fingerprint sensor and a Sony 16MP rear camera, and 8MP front camera, round out a top end device. Class leading battery life with a 4000mAh battery gives two-day performance. Dual sim slots are standard along with category 6 LTE. The Mate 8 is available in Gold, Silver, Grey, and Coffee, from all operators at very attractive prices. For more information, http://consumer.huawei.com/za/mobile-phones/index.htm

BusinessBrief

June/July 2016

BRIEFCASE

CRYSTALLISING THE STRATEGIC BUSINESS LANDSCAPE – Strategy analysis practices and tools for business leaders and strategy practitioners By Marius Ungerer, Gerard Ungerer & Johan Herholdt Business strategy is appealing because it contains insights that promise to outsmart and outperform competitors, leading to a future that is better, brighter and more rewarding than the present. But where does good strategy start? In their forthcoming strategy book, Crystallising the strategic business landscape, Marius Ungerer and co-authors Gerard Ungerer and Johan Herholdt provide readers with a solid point of departure for conducting impactful, relevant and future orientated strategy analyses and syntheses. Their approach is practice-led applications of strategic management tools that are based on sound theoretical foundations. The strategic business landscape is crystallised by viewing it from different vantage points to inform the development of strategic foresight, insight and cross-sight. Available from Knowledge Resources: +27 (0)11 706 6009 | orders@knowres.co.za www.kr.co.za

MANIFESTO FOR SOCIAL CHANGE – How to save South Africa By Moeletsi Mbeki & Nobantu Mbeki A Manifesto for Social Change is the third of a three-volume series that started seven years ago investigating the causes of our country’s – and the continent’s – development obstacles. Architects of Poverty: Why African Capitalism Needs Changing (2009) set out to explain what role African elites played in creating and promoting their fellow Africans’ misery. Advocates for Change: How to Overcome Africa’s Challenges (2011) set out to show that there were short-term to medium-term solutions to many of Africa’s and South Africa’s problems, from agriculture to healthcare, if only the powers that be would take note. And now, more than 20 years after the advent of democracy, we have A Manifesto for Social Change, the conclusion in the “trilogy”. For more information, contact: orders@booksite.co.za andrea@panmacmillan.co.za | +27 (0)83 460 2068

SWIMMING UPSTREAM – A story of grit and determination to succeed By Shirley Zinn Shirley Zinn’s story is one of determination, courage, and triumph over incredible adversity. Born and raised on the Cape Flats, Shirley never allowed her past to dictate her future. She proved that the typical story of a girl from the Cape Flats – that of gangsterism, alcoholism and teenage pregnancy – didn’t have to be her story. Instead she relentlessly pursued her own goals and forged an impressive academic career even when she faced significant odds. And when she’d done that, she set out to conquer the world of business. Shirley is a formidable woman with an amazing story to tell. She has risen to the top of the pile in both academic and business circles, and yet she has retained great humanity and empathy in the face of great personal tragedy. Her story has lessons for us all – whether we are ordinary or extraordinary, whether we work in business, in government, or at home. Shirley’s story will inspire you and show you that it is possible to achieve your goals, if you are prepared to swim upstream and be single-minded in getting where you want to be. Available from Knowledge Resources: +27 (0)11 706 6009 | orders@knowres.co.za www.kr.co.za

BRIEFCASE

BusinessBrief

June/July 2016

MOOOI JACKSON CHAIR Designed by Marcel Wanders, the elegant Jackson Armchair is part of Moooi’s new 2016 collection recently unveiled at Salone del Mobile in Milan. With a canvas of black leather and an embroidered high square back, the chair provides the ultimate comfort and support to put you in the right frame of mind. This piece epitomises Moooi’s theme for the 2016 collection, “Rebellious Harmony” embraces the polarity between creativity and business and between chaos and order. From Edge Interiors: www.edgeinteriors.co.za

X-DESK Contemporary furnishing re-discovers the proportions of classical art and timeless shapes transform immediately into symbols of modernity. The X-Desk is a contemporary executive desk, characterised by original lines, that are both functional and show strong personality. The X-Desk is manufactured in American Ashwood with a wood oil finish, and is solid throughout. It is a proudly green product and created exclusively from sustainable timbers. Every element of the desk offers the utmost in precision and aesthetical pleasure and would be an artwork in an executive office. Available from Yellow Box: www.yellowbox.co.za +27 (0)12 743 5464 | adele@yellowbox.co.za

SELETTI MULTILAMP Designed by Emanuele Magini for the Italian brand Seletti, these multifunctional desk lights take their inspiration from football field floodlights. With a combination of metal and cloth, the collection juxtaposes ideas of structure and form with that of very fine tailoring – each lampshade is very delicately and neatly pleated – making for a very interesting finished product. Available in two different types of chandeliers, a table lamp, a standing lamp and even a wall fixture, the Multilamp lighting series is designed to meet a multitude of lighting needs. Every fitting is available in both black and white. Contact Generation: +27 (0)11 325 5963 | www.generationdesign.co.za

BusinessBrief

June/July 2016

TRAVEL & LEISURE

Secluded Indian island PARADISE

4° south of the equator in the Seychelles, Fregate Island Private is a unique destination to experience the best the Seychelles have to offer. With one of its seven beaches frequently voted the world’s best, Fregate Island Private offers an exclusive ambiance in an unsurpassable setting.

uests may choose between 16 Private Pool Residences

pavilion, guests overlook the lush jungle and deep-blue seas.

for the ultimate in comfort and privacy. Beautifully crafted, all residences nestle nicely into the coastal

Together with the Banyan Hill Estate located on a hilltop on

line, naturally screened from each other. With their own luxurious

a secluded peninsula overlooking the harbour, all residences

terrace, large private infinity pool and Jacuzzi, daybed and dining

combine a high level of luxury with a unique feel of privacy and natural beauty. Fregate Island Private is simply “Unique on the planet”.

Fregate Island Private offers travellers the unique opportunity to enjoy an exclusive island experience with a team genuinely committed to conservation

Fregate Island Private offers travellers the unique opportunity to enjoy an exclusive island experience with a team genuinely committed to conservation. Meanwhile, luxurious accommodation is sensitively developed, with a spaciousness that allows guests to immerse themselves in the natural beauty while enjoying the finest hospitality that is synonymous with Oetker Collection. A large variety of fresh fish directly from the ocean is available. A selection of fresh, home-grown ingredients daily cooked, offers Créole and international cuisine at its best. Guests may enjoy a

meal anywhere, anytime on the island. In the Tree house high up in one of the island’s oldest and largest banyan trees, in the Yacht Club or choose any of the beaches for a BBQ, breakfast, lunch or dinner. Over 2 200 tortoises roam the island; they are symbols of Fregate Island Privates’ unparalleled conservation effort. Over 100 bird species find sanctuary on Fregate Island Private. Through ambitious conservation programs, the Seychelles Magpie Robin and other bird species have been brought back from the brink of extinction. Fregate Island’s Rock Spa is the ideal spot to both relax and revitalize the mind, body and soul. Drawing on age-old know-how and the healing properties of local plants, the ingredients are grown on Fregate Island. For reservations, contact: +49 (0)72 219 008 071 reservations@fregate.com | www.fregate.com n

BusinessBrief

June/July 2016

TRAVEL & LEISURE

Country corner getaway

he De Hoek Country Hotel, a 5-star boutique hotel, lies in a tranquil country setting only an hour’s drive from Johannesburg and Pretoria.

An impressive masterpiece of sandstone, Oregon pine, beautiful fabrics and handcrafted mahogany furniture, with 32 luxurious suites, exceptional cuisine and acclaimed service that blend seamlessly to create a classic, refined ambience where guests feel truly welcome, De Hoek is also a desirable conference venue for top executive conferences and meetings and for delegates wanting all the luxurious features within an elegant and exclusive environment. De Hoek’s elegant conference and function rooms are situated in the grounds of the imposing Stonebridge House; there are two smart conference rooms, three breakaway rooms and several options for dining/ entertainment areas. The formal Foundation Room, with its elegant interior and a service bar that leads off from the room, can accommodate up to 60 delegates. The smaller conference rooms are ideal for the executives who want somewhere luxurious, tranquil and well-serviced when meeting with their out-of-town clients – the Garden

Pavilion with a fireplace and large brass chandeliers can accommodate up to 30 delegates, while the Cornerstone and Capstone rooms which lead out onto an enclosed veranda, and into the Bridge Bistro restaurant with high ceilings, artwork and glass doors and windows overlooking the gardens, can accommodate 12 delegates. Michael Holenstein, De Hoek’s passionate master chef and his dedicated team, produce meals in the FrenchContinental style, paired with selected Cape vineyards wines. They ensure that the fresh produce-based menus accommodate all dietary preferences. Various activities including giant garden games, lawn croquet, boule petanque, clay pigeon shooting, spa treatments, mountain walks, off-road biking and team building activities such as hot air ballooning, Bear Grylls or murder mystery dinners, are available. De Hoek Country Hotel enjoys a harmonious association with the Mantis Collection of Boutique Hotels. For reservations, contact: reservations@dehoek.com +27 (0)14 577 9600 or +27 (0)82 893 3787 www.dehoek.com | @dehoek n

TRAVEL & LEISURE

BusinessBrief

June/July 2016

PRISTINE Haven

he secluded Anantara Medjumbe Island Resort in the Quirimbas Archipelago, off the northern coast of Mozambique, has reopened following an extensive refurbishment.

The 12-Villa, adults-only African island hideaway now features refreshed décor, luxury villa upgrades, new signature experiences and natural attractions and it will soon be the only African island resort to use 100% solar energy. The one kilometre by 300 metres Medjumbe Island can be accessed by a 45-minute light aircraft transfer from Pemba International Airport with flights from Maputo, Johannesburg and Dar es Salaam. Authentic luxury has a vibrant new look The refreshed décor gives Anantara Medjumbe a distinctive African island identity - it has been restyled using colourful patterns to depict the vibrancy of local culture with shades of blue and aqua reflecting the hues of the Indian Ocean. All 12 thatched beach pool Villas, which open onto soft powdery sands, exude a sense of natural luxury, including newly designed private splash pools with an aqua mosaic finish and a built-in Champagne step to sip bubbly while admiring the ocean view. In the villas and public areas most of the furniture and lighting was custom designed, with remarkable attention to detail by the interior designers, Savile Row and produced in Indonesia and South Africa. Various accessories were sourced from around the African continent; the framed artworks, sourced from local markets, were created using traditional wax printed capulana fabrics.

and scuba diving destinations and a prime haven for dolphin and whale watching boat trips. Turtles, frequently sighted in the waters, come ashore to lay their eggs - often right in front of the beachfront villas. Water Sport thrills range from water skiing to wake and knee-boarding. Adding to the range of ocean experiences on offer the resort’s new dhow sailing boat lessons offer couples a 90-minute experience of mastering traditional techniques - they have a choice of both taking on the challenge or one relaxing onboard while cheering on their partner. Guided by three experienced local skippers, they learn how to work the ropes, check for wind direction, control the sail and steer. Romantics can sail by dhow to picnic on a deserted island, or set off at dusk for a Champagne Sunset cruise and the new Robinson Crusoe-style star bed experience invites couples to spend a night sleeping in a king size four-poster bed surrounded by lanterns, beneath the stars. For reservations: medjumbe@anantara.com www.anantara.com | +27 (0)10 003 8979 n

Unforgettable ocean and island adventures Surrounding Medjumbe Island, the Quirimbas National Park boasts pristine coral reefs with an abundance of marine life. It is one of the world’s best snorkelling

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BusinessBrief

June/July 2016

TRAVEL & LEISURE

BIG sky SAFARI

Mhondoro Game Lodge, a luxurious new 5-star safari lodge, has opened in the malaria-free, “Big 5” Welgevonden Game Reserve in the Waterberg (Limpopo province). The exclusive lodge sleeps a total of only 20 guests and includes 2 Deluxe Suites; a 2-bedroom Executive suite; a 2-bedroom Family suite; a romantic Honeymoon suite with a private spa pool and viewing deck with a daybed; and a Villa that can accommodate six guests.

he ultimate in luxury and privacy, the Mhondoro Villa is perfect for families or groups of friends travelling together. It features a magnificent master suite and two additional bedrooms, all with en-suite bathrooms, as well as a private gym, yoga room and a heated swimming pool. Exclusive use includes all meals, teas and coffees, soft drinks, local branded beers and hand-select house wines, as well as a game-viewing safari vehicle with personal ranger and the services of a personal chef, butler and housekeeping staff. Dutch-owned and managed, Mhondoro is a fusion of African chic and edgy European influences, decorated by interior designer Myriam Vogel, the wife of the owner. The lodge features spectacular views and luxury accommodation, fine cuisine and passionate hospitality and service. Unique features at Mhondoro include

a custom-built stargazing “star deck”; and a waterhole with underground game viewing hide that is connected with the main lodge by a tunnel. At ground level, the hide provides excellent photographic opportunities from a distinctive perspective, as well as the excitement of getting really up close, anytime day or night, to elephants and other wildlife drinking from the waterhole. Other lodge facilities extend to a gym and heated swimming pools for all year-round swimming; and a dedicated Massage Suite complete with a private, outdoor spa deck and bath, where a variety of massage treatments are offered, along with manicures and pedicures. Welgevonden Game Reserve stretches across 35 000 hectares in the Waterberg and is a mere 2h45minute drive or a 50-minute flight from Johannesburg. Mhondoro is the

ultimate “big sky” destination with unimpeded sunrises and sunsets over the Waterberg mountains and valleys. Guests can expect varied terrain, breathtaking landscapes and a diverse natural habitat featuring the “Big 5”, including a large white rhino population. Guided walks with trained game rangers are offered by special arrangement, providing an excellent chance of spotting these precious, endangered beasts in their natural environment. Mhondoro is child-friendly, with a dedicated open-air play area protected by an elephant fence and a play room with games where children can enjoy themselves without disturbing other guests. Special children’s activities can also be arranged. For reservations, contact: +27 (0)87 150 2314 res@mhondoro.com | @MhondoroLodge www.mhondoro.com n

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BusinessBrief

June/July 2016

VIEWPOINT

Policy IDEAS for growth? South Africa is in deep trouble. Continuing with our current policy framework will not result in the millions of jobs and much higher growth that we need. It is time to challenge the conventional wisdom about growth, poverty and employment. If we don’t reform – with purpose and speed – much that has been achieved since democracy could unravel.

e need to rethink the approach to development, focus on our strengths and follow a much more market-friendly approach. You cannot achieve high growth if government is anti-business and yet simultaneously crony capitalist. Rhetoric must be matched by action. SA cannot change the global economy but we can make new policy choices for our country. Under the status quo, SA essentially administers and ameliorates poverty. Genuine inclusion is about moving beyond opportunities for the highly skilled and the politically connected. Reform required Too many South Africans are poor, with poverty managed through social grants and subsidies for over a third of the population who remain excluded. This is totally inadequate. Key areas in which reform must occur: • Government must place growth and jobs at the top of its policy agenda. Growth and employment must become the criteria by which the consequences, intended and unintended of all other policy initiatives should be assessed and repealed if necessary. • Transformation and growth must work together for all South Africans to benefit and not just an elite. Rebalancing the current approach to transformation away from elite enrichment to growth-driven inclusion and empowerment, so that it supports rather than undermines growth prospects is one of SA’s most urgent priorities • The country needs one credible new strategy for faster and more inclusive growth replacing the three

contrasting and competing ones we have at present. From energy, infrastructure delivery, to housing, transport, schooling and healthcare, appropriately regulated but liberalised markets can deliver cost effectively and very widely. Competition is good for growth – it should apply across the entire economy including the SOE sector. • The consequence of the mismatch between policy-makers’ vision of a high-skill, high-wage growth path and the reality of an under-educated workforce is unemployment on an epic scale. By driving up the costs and regulatory risks associated with employing people, the implementation of the decent work agenda has priced unskilled workers out of the labour market. In the eyes of our policy-makers, work that is not “decent” is worse than no work. The implication is that no wage is better than a low wage. The South African economy must fire on all cylinders. This includes creating space for labour-intensive industries that use lots of unskilled workers to grow. • Growth requires a reset of the state-business relationship - The country will not succeed if government is pro-growth but anti-business and simultaneously crony capitalist –M arket friendly regulatory certainty is essential for big and small business – Business must also get its own house in order • Skills are vital at every point in the growth agenda. If SA does not improve the quality of technical and vocational training, we risk repeating the mistakes of basic education – expanded access but very poor quality output. • SA’s future is urban. Policies, power and resources must now catch up with this reality. SA needs to end its ambivalence about urbanisation. Large cities must be at the heart of a new growth strategy. SA needs new housing and transport policies that support growth. Tough choices SA needs accelerated growth that is urban-led, private sector- driven, enabled by a smart state and targeted at mass employment. If we make the tough choices required to pursue these goals, the lives of the majority of South Africans can change in a generation. n

By Ann Bernstein Executive Director CDE ann@cde.org.za @CDEsouthafrica

VIEWPOINT

BusinessBrief

June/July 2016

Enterprise & SMME Development

fricans do not want handouts, Africans want jobs. In a time of intense market competition and widespread unemployment, businesses and governments alike need to look for innovative and effective ways to create jobs and promote socio-economic stability in the region. Overreliance on government and “big-business” jobs needs to come to an end, and small, medium, and micro-sized enterprise’s (SMME’s) need to be supported. The role of procurement, a subprocess of supply chain management, in facilitating SMME growth and development needs to be considered as an important avenue for socio-economic development in Africa. Procurement practices unsupportive In a recent longitudinal study conducted by PanAvest International and Partners, the procurement attitudes and activities of various public and private organisations were examined. The study found that although procurement has been globally recognised as playing an essential role in local and regional wide industrialisation, current purchasing and supplier selection practices do little to support SMME growth on the continent.

and implementation plans, and 90% indicated that they did not currently have any internal supplier diversity and SMME policies in place. This is largely a result of the overwhelming majority of participants (80% - 82%) viewing SMME development and support initiatives as the responsibility of on the one hand, national governments, and on the other hand, large global organisations operating in the region. Support SMME development Governments and the private sector need to work together to coordinate local supplier diversity, enterprise development, and SMME growth. They need to be bold and aggressive in their approach to SMME development and commit themselves to long-term strategic thinking instead of focusing on short-term economic gains.

Indeed, it was found that while over 55% of African government spend went towards purchasing and procurement of goods and services, less than 10% of that spend was directed towards local suppliers. In addition, over 80% of the government organisations participating in the study were unaware of the true origin of the goods and services that they were spending their money on – indicating a clear lack of focus on longterm SMME and enterprise development thinking.

When it comes to public sector input, African governments need to provide clearly defined national and regional procurement and supply chain management strategies related to SMME development. Such strategies should focus on increasing regional wide intraAfrican SMME trade through strategic consumer and industrial sourcing. Sectors that have significant long-term growth potential, such as agriculture, tourism and ICT should be important areas of focus, and governments should consider committing at least $70mn of their annual tax revenues (approx. R1.1bn) directly toward SMME and related local supplier diversity initiatives over the next 10 years. In addition, governments need to offer attractive incentives and rebates to local and international businesses with longterm interests in SMME and supplier development.

Of the locally owned organisations and corporations involved in the study, 92% admitted to not having any medium- to long-term SMME strategies

The private sector can also contribute to SMME growth and development in various ways. To begin with, they need to be open to working with government

in their initiatives to improve SMME growth and enterprise development on the continent. Business needs to accept that procurement is more than just a cost saving function, and that SMME growth and supplier diversity needs to be viewed as a medium- to long-term business imperative. Organisations may need to consider collaborating on joint region-wide procurement strategies that will contribute towards both organisational performance and industrialisation. Businesses in the private sector can begin to have a significant impact on SMME development and job creation by contributing between 0.5 and 5% of their gross annual profits to SMME and supplier development initiatives. If African countries are to realise their inherent potential and experience long-term local and regional socioeconomic success, it is imperative that both governments and businesses start to take bold steps towards supporting enterprise development and SMME growth on the continent. n

By Professor Douglas Boateng Professor Extraordinaire SBL UNISA dboateng@panavest.com @UnisaSBL

BusinessBrief

June/July 2016

VIEWPOINT

Africa is OPEN for business

frica is both a complex and diverse continent, but one that is strongly poised for growth, despite its economic, trade and social disparities. Leaders in Africa are no strangers to dealing with difficult economic and political challenges, and this resilience, will stand them in good stead to institute a framework of intra-Africa trade, which will benefit all African economies – ensuring that the world keeps its eye on the continent.

tariff duties and opening access to single or multiple markets, there is still a growing trend of trade regionalism in the world, where more bilateral and multilateral trade agreements are being entered into. Africa too, is privy to a growing number of bilateral and multi-lateral trade agreements, which will provide its exporters with an opportunity to claim preferential treatment. In fact, the continent’s answer is the Tripartite Free Trade Area (TFTA).

African incentives landscape KPMG undertook a survey that examined the incentive opportunities African countries avail to both local and foreign investors. The purpose of the survey was to provide solid insights on the tax regimes across all African regions – information crucial to the investment decision making process. Understanding the African incentives landscape is a critical component for any company looking to invest or expand their business into Africa successfully – especially considering that the continent is indeed open to business.

The proposed TFTA, which would cover 26 (out of 54) African countries is aimed at creating the biggest free-trade area on the African continent, just as it was the answer to the range of FTAs that have been concluded within Asia, the EU and most recently the Trans Pacific Partnership (TPP) involving the USA and 12 countries across the Pacific Rim.

According to the survey results, from a global perspective, the current economic downturn and protectionism on both a local and regional level is expected to gain momentum. In particular, food and domestic manufacturing production capabilities are expected to take on much more political significance in many countries across the world. A recent example is the year-long prolonged negotiations on the continuation of the AGOA treaty between SA and the USA, with SA being compelled to compromise in allowing US poultry and beef imports into SA, in order to continue to benefit from the valuable AGOA trade agreement. While Free Trade Agreements (FTAs) can mitigate the impact of protectionist measures, reducing or removing

By Mohammed Jada, Head: R&D Tax and Incentives KPMG Africa desk Mohammed.Jada@kpmg.co.za @KPMG_SA

Africa-2–Africa Trade The African continent features 17 trade blocs and the TFTA will result in consolidating the three significant trade blocks: the East African Community (EAC), the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). As can be seen by the almost decade long time-frame for the TPP to be negotiated, getting a TFTA across Africa would also not be without its own challenges. Not only would African countries need to significantly expand its range and volume of goods manufactured and produced, but it would also need to focus on Africa-2-Africa supply chains and production. More countries on the continent are attempting to diversify their economies – shifting away from an over-reliance on extractive industries to branching into mainstream industries such as manufacturing and value-added services industries. African countries appear to be introducing new or revised incentives, seemingly to compete more favourably for both local and foreign direct investment. No trade deal can provide a country with a guaranteed return of additional revenue, and this is why every trade agreement is unique. Teamwork and commitment is required by African leaders to remedy common problems, which of course offers the opportunity for Africa to start doing business with itself, for itself, thereby assisting in better regional integration. For Africa to maintain the mindset of being “open for business” and to ensure the upward mobility in terms of economic growth on the continent, a collaborative effort from all stakeholders (such as government, local businesses, investors and the people) needs to be taken. n

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BusinessBrief

June/July 2016

MANAGEMENT

Are TODAY’S unions for tomorrow? As the South African government continues with its ongoing retirement reform process, the country’s largest trade union federation, Cosatu, remains extremely vocal in its disapproval of certain elements, vowing to implement strike action to protect what it deems to be its workers’ rights.

osatu said in a statement: “Our opposition to this law remains unwavering and we remain determined to implement our federation’s congress resolution, of fighting the National Treasury’s unilateral decision to control and manage workers’ deferred wages.”

particularly outspoken about the compulsory preservation of retirement fund monies when members leave an employer-sponsored retirement fund, as well as a change in the tax treatment of provident funds that will essentially bring the operation of these funds in line with pension funds as a long-term savings vehicle.

In terms of labour relations, SA was recently ranked 107th out of a total of 140 countries surveyed. This is according to the World Economic Forum (WEF) Global Competitiveness Ranking 2015/2016, which describes the labour market as “inflexible” and something that needs to be addressed. As we look at the unfolding Cosatu versus government issue of pension reform, this would certainly seem to be an apt description.

Cosatu states that, “These savings are part of workers’ hard-earned salaries and should be accessible to the workers, as and when they need them, especially in the absence of a comprehensive social security….Workers will fight any attempts to impose the compulsory preservation of our hard-earned deferred wages.” Cosatu is against the principle that workers belonging to an employer-sponsored retirement fund will lose their existing option to withdraw their retirement savings in one go, either upon retirement or when changing jobs.

The issues Cosatu threw down the gauntlet in the wake of President Zuma’s signing of new tax incentives into law in January this year.

Cosatu added that the signing into law will “complicate” its support of the ANC in the local government elections due later this year. And therein lies the proverbial rub.

From the government’s perspective, its retirement reform process, which was first introduced in the Finance Minister’s Budget Speech of 2011, is part of its ongoing efforts to bring more workers into the regulated long-term retirement savings fold and ultimately help a growing number of South Africans to become more financially secure during their retirement years.

Trade unions and politics While trade unions exist fundamentally to help better people’s lives and fight for the rights of those who are otherwise potentially disempowered, there tends to be an intrinsic link to the political landscape in doing so.

Cosatu believes that the issue centres on the rights of workers to be able to access money that has been saved and invested in their names by both employees as well as employers. The matter is complicated by the fact that Cosatu is both SA’s biggest trade union federation and an alliance partner of the governing ANC. Almost since the beginning of the retirement reform process, local trade unions have been

One of the most famous examples comes from Poland in the 1980s, with the formation of the famous Polish union Solidarity in 1980 after 17 000 workers had seized control of the Lenin Shipyard in Gdansk to protest, among other things, against

By Johan Botes Partner Baker & McKenzie South Africa johan.botes@bakermckenzie.com @bakermckenzie

MANAGEMENT

a recent rise in food prices. At the time Poland was part of the Communist Bloc and under the ultimate control of Russia. Over the next 15 months, the union’s membership grew from one to nine million people, representing a quarter of the country’s population. It didn’t take long before union leader Lech Walesa was imprisoned for nearly a year by the Polish military leaders, with the associated outlawing of Solidarity. Nonetheless, the union constantly preached a policy of non-violence. The Polish authorities eventually agreed to talks with Solidarity in early 1989, resulting in a comprehensive agreement on sweeping political and economic reforms for Poland that also officially recognised Solidarity. Proud union history South African unions also have a proud history within the political landscape. The role played by local unions in helping to dismantle apartheid legislation and improving practices in the workplace remains one of the union movement’s major achievements.

BusinessBrief

June/July August/September 2016 2015

militant, as borne out by the latest WEF 2015 Global Competitiveness Ranking. Going forward…? While we wait to see how the battle over pension reform between Cosatu and the government plays out in the near future, we are also seeing a decrease in the membership of trade union membership in SA over the past ten years. At the same time we are also seeing an increase in the number of new trade unions. According to The Economist, with just a few exceptions, the membership numbers of trade unions have dropped dramatically in the rich world over the last three decades. This seems to be reflected in SA also and it would appear that many members are disillusioned with what was a once-respected movement.

Do we still need trade unions in SA? The need has not disappeared but the issue of militancy is becoming increasingly important.

Trade unions are recognised in our Constitution, which provides for the right of workers to join trade unions, and for unions to collectively bargain and strike. The Labour Relations Act has given workers and their unions redress through mediation, conciliation and arbitration. The issue of militancy Unlike the example of Solidarity in Poland, South African trade unions are not always known for adhering to a policy of nonviolence. Perhaps the worst possible example of the result of violence during a local strike comes from the 2016 wildcat strike by the Association of Mineworkers and Construction Union (Amcu) at Lonmin platinum mine. The Marikana massacre, as it has come to be known, was the culmination of three years of labour unrest on the country’s platinum mining belt. In August 2012 the strike degenerated into incidents of violence between workers, security forces and policemen. Finally, on 16 August, in scenes that played out around the globe, 34 miners tragically lost their lives in a single day when police opened fire on a large crowd of miners. The massacre resulted in a commission of inquiry by retired judge Ian Farlam. The Marikana massacre is an extreme example but the fact remains that SA’s work force is known to be

The question must be asked: do we still need trade unions in SA? On the surface, the need has not disappeared but the issue of militancy during labour action is becoming increasingly important. In addition, unions also offer a number of products. Do trade Unions need to remain relevant by offering more benefits to their members? As the middle class grows in SA we are also seeing a move away from the collectivism of the past. More employees today are now better off and therefore better able to look after their own interests in the workplace. The labour unions in SA were previously at the forefront in the march to democracy. In today’s changing scenario, what role can trade unions play now that the country’s citizen rights are established, and how will they adapt? n

BusinessBrief

June/July 2016

MANAGEMENT

Shares reward?

stablishing the parameters of executive compensation within an organisation is a complex task. The board needs to craft a package which is in line with business strategy and performance and which is of significant value to the executive, or there is a risk that value is lost by both. Compensation is a tool which can be managed to align company success with executive deliverables so as to benefit the bottom line and inspire business executive performance. There are three basic types of long term incentive schemes which align shareholders and executive interests and work best over a period of between three to five years. Performance share/unit scheme This type of scheme offers the executive shares or “full value” units which are linked to the value of the company. The total value of the shares or units offered is aligned to the value of the executive’s package. When these vest (become available to the executive),

By Laurence Grubb Exco member of the South African Reward Association (SARA) laurence@khokhela.co.za @SA_reward

the performance of the company is compared to the performance objectives set at the time they were offered and this determines the number of shares or units that vest and the executive receives the full value. The executive is therefore driven to improve the share price or unit value and to ensure the company meets or exceeds the performance objectives set. Share option/appreciation unit/ rights scheme This is similar to the previous scheme but instead of full value units, the executive is offered options/units/rights where they benefit from only the growth in the value. So they only receive the difference between the value at vesting and the value at commencement. There may be performance objectives attached to the vesting or a hurdle, such as a minimum level of company performance, below which nothing vests. These schemes should ignite executive commitment as benefits are closely tied to the success of the business. The challenge with this type of solution is that the share price can be impacted by factors outside of the executive’s control and it can be tricky to set the performance measures today for market conditions and organisational objectives in three to five years.

Share Purchase Schemes The third type of scheme aligns executive interest with shareholder interest. Executives are asked to invest their own money into shares so they are completely engaged with the shareholder vision. The ways in which the schemes are structured depend on who the shareholders are and what they prefer, the executives and the expertise within. Some companies have their own reward departments with specialists on board to advise them. In other instances executives seek the expertise of outside consultants on how best to construct and manage their packages. In both cases it is essential that the final package align with company strategy and ensure executive buy-in. Linking incentive to reward and reward to performance is an art form and many companies and reward specialists spend a good deal of time and effort in identifying and implementing the best solutions for their business. You need to define performance and establish which measures – financial and other – evaluate that performance. Companies need to be focusing on making sure that performance criteria are well-defined and that they are as relevant in five years as they are today. n

MANAGEMENT

BusinessBrief

June/July August/September 2016 2015

The Purpose Effect? By Kanchana Moodliar Business Humanizer & Partner Innate Motion kanchana@in8motion @innatemotion

he planet is the hottest it has ever been this year, millions of people became refugees, and closer to home in SA, racial tensions are increasing. People are becoming frustrated with leaders and organisations whose promises have become cheap political fodder. Out of this frustration and chaos though, something magical is starting to happen. We are starting to see a rise in the number of people who are making change their responsibility. These people are getting behind real fights, real social and economic issues that matter to all of us and if they win, we win. Who are these people and how can we join them? Social entrepreneurs are people who find a specific challenge in society and then frame the solution as a business opportunity. They are working on ways to make society better, live consciously, give back and hopefully do so sustainably. We are seeing a rise in this group, their business ideas and their unconventional stance to business. There is a certain activist quality about them. Think about Nelson Mandela fighting against apartheid, Mother Teresa fighting poverty, and so many other icons of our time. It seems that social entrepreneurs borrow from these characteristics as they rise up and fight for what we all care about in order to make a real positive change in society. We call this, brand activism. It’s about building a brand

People are becoming frustrated with leaders and organisations whose promises have become cheap political fodder

or business around activist qualities. An activist cares for what others care for rather than building something that is made solely for profit. Now let’s bring this back to the corporate world. Are you wondering why you are not a social entrepreneur? Why are you not using your force for good? Why are you not using your business opportunities to make the world better? Well it’s because you, like many others, have probably thought that the only way to do business in this world is the way it’s always been done: drive price down, make the most money and take out the competition. Now, imagine doing all that and strategically adding a purpose as well? We can all serve a purpose It feels good when we get behind something that has meaning to us. We feel lighter, better about being a good person and making a real difference. When it comes to business we feel as though being generous, good or kind makes us look weak or like a pushover. Well, here’s the good news. Now is the time to be the nice guy. Purpose is rising and those who succeed are the ones who dare to care for the people they serve. If the women around the world can do what they are doing to bring about change in their country, what is stopping you from effecting change that ripples across the country, Africa and the world too? n

BusinessBrief

June/July 2016

MANAGEMENT

Africa’s female entrepreneurs Very little research is available to help us understand the courageous women of Africa who trade in their full time employment for the world of entrepreneurship as the research that does exist comes from studies carried out in developed economies. In the developing world, and South Africa specifically research has mostly focused on the informal sector leaving us in the dark about the formal sector and the women who own these businesses.

A places high value on entrepreneurship as our economy looks to entrepreneurs as critical drivers of growth and job creation but if these efforts are to succeed, we need to move beyond a focus on informal sector enterprises and understand more about what drives success in the formal sector and how to support these businesses. These are the entrepreneurs whose efforts are likely to have the greatest impact, and if properly supported, their contribution could radically change the trajectory of the economy. The SME Growth Index - Conducted by business environment specialists SBP - was conceived to study the dynamics of the country’s under-examined formal small and medium enterprise sector over a period of time. The most comprehensive study of its kind to be undertaken in SA – it involves a survey of a randomly-selected panel of 500 firms, employing between 10 and 50 people in the manufacturing, business services and tourism sectors. The study reveals some of the key dynamics driving women entrepreneurs in SA’s SMEs and examines whether, and in what ways, women entrepreneurs are different from their male counterparts. Women in Business Seminar aims to put a face to female entrepreneurs on the continent, to bring these women together and to help foster alliances between their businesses which will ultimately impact positively on these businesses as well as the communities in which these businesses operate. Motivation for female entrepreneurs Comparative studies indicate that women are motivated to a higher degree than equally qualified men to become entrepreneurs for family-related lifestyle reasons; and that women are less motivated than men by wealth creation and advancement reasons. Among the SME Growth Index panellists, however, the motivations of the panellists in the SME Growth Index are heavily opportunity-driven. Majorities among both our male and female panellists were motivated by pull factors. Roughly equal proportions of men and women had done so out of necessity. Considerable proportions of both groups were motivated by a combination of opportunity and necessity factors - highlighting the ambiguities that might

By Karabo Keepile Managing Director Nasedi Media & Communications karabok@nasedimedia.com @ChiLLimag accompany a decision to enter an entrepreneurial career. According to the study, one small but important difference between the genders is that men show a greater interest than women in expanding into new markets, typically outside SA. Only one in five women-owned SMEs is exporting, against nearly one third of those owned by men. The largest difference between the genders’ export behaviour is found in manufacturing: nearly half of all manufacturing firms owned by men export, while only 29% of those owned by women do so. Again, this is consistent with the findings of international studies, which show that women are more likely than men to have businesses with a geographically localised client base. The studies panel showed not only that women are keen to grow their businesses, but also that they are more positive about the business environment and the future than their male counterparts. Over the three years that the SME Growth Index has been running, one of the clearest messages that pops up is that business owners are finding the environment increasingly tough. Although this view has been expressed across the panel, it is somewhat less prevalent among women than among men. In fact, around 14% of women entrepreneurs believe that it has become easier to do business. Professor Brush, Chair of Entrepreneurship at Babson College in the United States described the global growing community of women entrepreneurs as “one of the most significant economic and social developments in the world.” According to the International Labour Organisation women entrepreneurs now account for a quarter to a third of all businesses in the formal economy worldwide. This is not merely forcing us to rethink women’s economic roles, this phenomenon is literally changing the modern global economy. n

EMBRACE

olatile conditions in SA and the world have given rise to growing uncertainty amongst business leaders, and the need to embrace complex systems planning must become a priority for sustainability and future growth. In complex systems the use of quantitative and qualitative forecasting and prediction to inform strategic decision-making had become more challenging, if not outright dangerous. Complex systems involve numerous stakeholders or components (or sub systems), interacting in a local and non-linear manner with each other – but without considering the impact of their actions on the rest of the system or the other systems they are interacting with. Society is a complex system, so are political and economic systems. Complexity is also due to the free will of these elements (humans), making it difficult to predict the outcomes. Tunnel vision Prediction could lock business leaders and policy makers into a kind of “tunnel vision”, a strategy that only recognises one destiny, making it difficult to adapt when unexpected events occur. In short, history is no longer a reliable indicator of the future; predictions based solely on the past (and past data) will expose organisations to unpleasant surprises in a complex world. While the growing popularity of scenario planning in the mid-20th century offered a way to unlock thinking by enabling organisations to consider and prepare for more than one probable scenario, it had its shortcomings. Exponential change and unending transformation and disruption

By Michiel Jonker Director: Future Studies Grant Thornton michiel.jonker@za.gt.com @grantthorntonZA

complexity! created a world where society no longer deals with a few probabilities but with an infinite number of possible scenarios. We live in a world that is complex and non-linear, where seemingly insignificant events can suddenly bring about major unexpected consequences. As there is no way to predict, or even think of all these potential futures, scenario planning – which is normally capped at a maximum of four scenarios – cannot exclusively be relied upon to support our strategic planning. Find weak signals In complex systems we focus more on understanding the present, than to try to predict the future. If we understand what a system’s disposition or inclination is in the present, and which direction it is evolving into, we can start monitoring for weak signals indicating that something in the system is about to shift. Such signals triggered a higher state of alertness enabling systems to be able to monitor certain aspects more closely. Planning should shift from a focus on the future, to a focus on the present and the evolutionary potential that might be found there.

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Traditional methods to understand the future were not totally irrelevant – even today. Western wisdom is informed by a cultural approach of “either-or” thinking – where either one or another solution is the best and only solution to the exclusion of others. More useful was to approach complex problems with a “both-and” approach. This approach implied that multiple available methods or solutions could be used, each in the context where it was most appropriate. Forecasting and trend analysis, scenario planning and embracing complexity and working to identify “weak signals” of change in complex societies are all seen as valid within contextual boundaries. n

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GREEN BUSINESS Turn green to gold! The private sector considers a longer timeframe than most Non-Governmental Organisations (NGO’s) and understands that businesses can benefit from the principles of sustainable development (SD) – social development and environmental protection – focusing on economic development: people, planet and profit.

overnments struggle to be all things to all people. The private sector has the skills and access to investment funding needed to drive development, says Dr Robert Morley, Projects Manager at SFM Africa. Detailed planning, with clear objectives and well-defined roles and responsibilities for both government and the private sector partners is necessary to achieve sustainable development. There must be a strong legal and regulatory framework, with real rights granted to the project developers, protected under law and with an ability to monetise or trade them. Key investment considerations:

• Public-Private Partners (PPP) must be dedicated to integrated, ethical and sustainable development and landscape conservation. • Long-term investors are required who share the vision of the PPP for sustainable growth. • Private Partner must hold long-term land-use rights for the development of its underlying businesses through a controlling interest and must establish strategic and technical partnerships for progressive development. • An SD Plan should be a cornerstone of an integrated development strategy to maximise FDI and improve living standards while conserving the countries environment and optimising its natural resources. • Projects can include forestry and timber processing, agribusiness, infrastructure development, green energy and ecotourism. • Key shareholders should have extensive experience of developing markets, a strong track record and commitment to the vision.

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June/July 2016

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•T he project developer should engage with leading operators in key business sectors. Corporate sustainability programmes critical Keith Cassie, Senior Manager, Engineering and Energy Management, Group Real Estate Services at Standard Bank, maintains that what is certain in SA is that energy costs will continue to spiral upwards. Whether the country remains bound to coal-fired power stations, or makes the move to nuclear, expenditure on energy resources will be immense. Corporate sustainability programmes are moving to the arena of “nice to haves” to that of “must-haves”. Although many of these initiatives are costly when viewed from an industrial, manufacturing or corporate standpoint, the rising costs of energy make amortisation of the investment quicker than it was in the past – making the case for considered investments in energy sustainability. Legislation, as encompassed in the draft carbon tax bill released for comment in November 2015, will also intensify corporate attention to energy saving. Even though the tax may become law only in 2017, business will be expected to play its part in achieving the ambitious plan to reduce greenhouse gas emissions drop by 34% by 2020 and 42 % by 2025. Part of the assessment process involves identifying priority energy issues and then sourcing the appropriate technological solution. The moral of the story is that sustainable energy programmes are no longer fashionable as CSI projects undertaken to make “green” customers happy, but are becoming essential investments. Corporate responsibility reporting Shireen Naidoo, Director in Climate Change and Sustainability Services at KPMG in SA, notes that SA is viewed as a global leader in corporate responsibility reporting. A key driver is the King III Code of Corporate Governance that requires all JSE listed companies to produce an Annual Integrated Report. A study undertaken in 2015 by KPMG SA, reviewed SA’s corporate responsibility reporting covering the top 100 companies (by market capitalisation) and representing the financial services, retailers, manufacturing, commodities (mining and metals sector included), telecoms and IT, medical, entertainment, logistics and transportation, construction and materials sectors. This study took place as an extension of the Currents of Change: The KPMG Survey of Corporate Responsibility Reporting 2015. The results of placed SA’s corporate responsibility reporting growth rate fourth behind India, Indonesia and Malaysia respectively. Impacts from Megaforces According to the report, climate change, water scarcity and, energy and fuel are the global megaforces that have

the largest impact on South African companies. Careful considerations, including stakeholder engagement, cost assessments of externalities and transparency in reporting, need to be made to address these global impacts. Material issues & stakeholder engagement The disclosure of material issues over non-financial information has become increasingly important to investors. Material issues are disclosed by 59 of the top 100 companies. 44% of these companies are able to clearly link the material issues identified back to stakeholder engagements. Stakeholder engagement is seen to be prioritised by companies is through the large proportion (76%) of companies that made specific reference to actions taken to address stakeholder feedback. Targets & intensity metrics Finite targets are necessary as they assist in holding companies accountable for their performance, however the study shows that few targets are time bound (22%). The main intensity metrics for the top 100 companies included GHG emissions, energy and water. Intensity metrics are a tool used to benchmark performance, however, the types of intensity metrics used are inconsistent between companies and sectors. Initiatives from a sector-level are required to reach agreements on consistent approaches. Transparency and balance Positively, 85% of companies reflected some form of transparency and balance in their reports, but only 45% of the companies surveyed were fully transparent and balanced through reporting on both successes and failures or challenges. Assurance Many global companies obtain assurance over their whole report while South African companies tend to obtain assurance over selected information. Of the 39% that do obtain external assurance, 70% use the major accountancy firms. The study showed that the Global Reporting Initiative (GRI) is still the most commonly used reporting framework both locally and abroad. The revision comes with the intention to make it current with international corporate governance codes. The Draft King IV also supports the shift in the approach towards capitalism and considers the developments in corporate governance. One of the crucial changes from King III to King IV is the “Apply or Explain” approach changing to “Apply and Explain”. This now means that the applications of the principles are assumed and that all disclosures on practices implemented and progress on corporate governance is explained. The implementation of King IV will build on the already growing integrated reporting culture adopted by the South African business community.

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Cashing in on the circular economy Marilize Worst, Managing Director at SmartMatta, says that within many companies around the world, there is a growing understanding and awareness of the value of waste. Instead of a mere hassle, waste is being viewed as an important resource – particularly among the larger and more established corporates. The shift from considering waste management as a cost saving exercise to a value-add to the bottom line is slowly infiltrating strategic business thinking worldwide.

Sustainable investing Henry Munzara, STANLIB Head of Research & Theresa Heath, STANLIB Equity Analyst, say that investors increasingly appear to want “do the right thing” when it comes to deciding where to put their money. This might be driven by a social conscience as well as a desire for sustainable outperformance. Asset managers are grappling with how best to assess the influence of environmental, social and governance (ESG) factors on portfolios and how to measure their impact on investments. ESG factors cover a wide range of issues from air pollution to income inequality and corruption. As these issues can significantly influence investments, incorporating ESG is becoming an industry-wide standard. A November 2015 Morningstar report “What Factors Drive Investment Flows?” found that investors expressed a strong preference globally for funds that invest in a socially conscious manner. The report found that equity funds that say they are socially responsible receive 0.40% greater flows a month than funds that do not. According to the report: “We do not have any strong story to tell for why this difference exists, though these differences do seem to be ingrained and persistent.” Investors “nearly universally preferred funds with socially conscious agendas.” Asset managers exert this influence on corporate behaviour through active ownership and investing for the long term. This can be done through proxy voting and continuous engagement with company management. This kind of pressure can encourage companies to change and become better corporate citizens, and is more effective than selling out a position. Investment managers and their clients have historically been concerned that responsible investing automatically means a sacrifice of returns. While there is no conclusive evidence that incorporating ESG results in better investment returns, this approach allows for a better assessment of operational and financial risk, which leads to better evaluation and forecasts.

This new approach requires “re-thinking” waste as an integral component of a corporate supply chain. As research has shown, it’s a positive development cycle that preserves and enhances natural capital, optimises resource yields and minimises system risks. It is often referred to nowadays as a “circular economy” and closed loop approach – which optimises value throughout the life cycle of products. Leaders must apply circular design thinking in order to truly leverage and benefit from this previously undermined resource. Long Term Gains The application of circular design thinking to waste management operations (and subsequently and consequently to various areas within the supply chain) has the potential to add various values and long-term business advantages. These include financial benefits, better information and reporting, increased competitiveness and brand protection – to name a few. Importantly, this approach also enhances customer loyalty in the long-term and strengthens company identity. The target of zero waste to landfill has prompted rapid development in waste minimisation and beneficiation technologies – and subsequent achievements in waste reduction targets are reported. Despite all the progress made to reduce waste and its impact on the environment along the value chain of some businesses, waste management is still predominately implemented operationally as a separate leg in the supply chain. This is problematic because procurement strategies do not look through the entire cost of a product. For example, marketing often decides on a specific packaging material for the product but doesn’t necessarily evaluate its recyclability – so the packaging ultimately ends up costing the company more in terms of disposal during production runs and at general consumer disposal. Adopting a systems approach A systems approach provides benefits in the reduction of transport costs, generation of added value through waste handling optimisation, and integration of infrastructure. Together, these benefits translate into a decrease in energy consumption and subsequently carbon emissions. In order to create shared value for all stakeholders, the target

FEATURE

of zero waste must be incorporated in the design and implementation of the supply chain strategy. A clear understanding of the technology and operational requirements to deviate waste from landfill must be clearly unpacked, and form part of the design of the closed loop supply chain. Solar energy boosts profitability Megan Sager, Managing Director at Sustainable Solutions, notes that in today’s sluggish economic growth environment, slow revenue growth refocuses attention on cost cutting to boost business’ bottom line. An obvious item to tackle is utility costs. Electricity tariff inflation has consistently outpaced general price inflation since 2007, with current average tariffs more than 250% higher today than they were then, rising by an average of 20% annually. With the exception of imports, it is difficult to imagine an input cost that has been of greater consequence for business in SA over the past decade. Solar rooftop installations have recently emerged as an exciting alternative to the grid, as a result of both rapidly falling capital costs and a proliferation of innovative payments models. Mid-sized commercial installations (250-500kWp) cost in the region of R17-20 000/kWp (excluding storage), with the accelerated depreciation tax allowance now enabling businesses to deduct 100% of the cost for tax purposes in the first year. Businesses with access to funding at prime rate may consequently be able to generate electricity during the day at tariffs of R1.00-1.10/kWh, on par with or – in the case of small business – below the applicable Eskom tariff. In Cape Town, selling excess generation to the municipality is possible, but at tariffs significantly below cost. Innovative funded solutions have also emerged, removing the capital outlay barrier. The most interesting is a power purchase agreement between the solar developer, which owns and operates the rooftop system, and a business

occupying the building. Customers pay only for electricity consumed. Some of the larger property companies are offering similar options, tackling the impossibility of tenants on 3-5 year leases signing premise-linked contracts for 10-20 years. Solar leases are similar, but do not offer the same direct link between pay and system performance. Benefits of REIPPPP Scott Brodsky, Partner and Energy Lawyer at Macfarlanes, says that it is worth reflecting on the successes of the country’s Renewable Energy Power Producer’s Procurement Programme (REIPPPP) and why it has achieved what many commentators believed was an unachievable feat. The REIPPPP has been a resounding success, spurring not only investment into SA’s energy sector, but in the broader region. The effect of load shedding on life, on businesses and the wider economies is devastating. Although SA is having temporary respite from load shedding, some countries in the region are experiencing 12 to 16 hours per day with no electricity. The good news is that IPPs are helping tremendously and the need for new generation has translated into significant new opportunities. The successes of the REIPPPP have been notable. The success story of SA’s renewable energy programme is impressive when one views the figures. Launched in 2011, the REIPPP Programme is bringing about a tangible transformation to our country’s power sector and economic and physical landscape. The competitive bidding approach clearly demonstrates that renewable energy options, and specifically onshore wind and solar PV power, can already be delivered at lower costs in energy terms, than new build fossil fuel solutions. Risk of water scarcity Karin Ireton, Chairperson of the Sustainable Development Forum at the Institute of Directors in Southern Africa (IoDSA), says that water prices look set

BusinessBrief

June/July 2016

to escalate in the short to medium term to reflect its importance and scarcity. This price escalation will be the catalyst for greater efficiency in the use of water, and stimulate the necessary cooperation across all stakeholder groups. While boards need to start developing strategies to mitigate operational water risks, they also need to be aware that access to and management of water is an issue of quality, quantity and access. Business challenges are not restricted only to increased water pricing, or to the many technical issues relating to water quality and access to reliable supply. Access to water is also a social justice issue and the cause of numerous service delivery protests. Business also faces administrative challenges that stem from a shortage of technical and managerial skills within the multiple players in the governance structure. The allocation of funds is also sometimes inefficient – sometimes corrupt. At a more practical and immediate level, businesses generally need to take a highly proactive approach to water use. Research has shown that there is a wide variation in the efficiency with which businesses in the same industry use water. Benchmarking themselves against their peers, locally and globally, would provide businesses with realistic targets based on what is achievable. Starting to report on water impact separately in their integrated reports should thus be a priority because it will take some years for companies to understand the complexities and start generating accurate and meaningful reporting. Tech builds greener business Ian Jansen Van Rensburg, Senior Systems Engineering Manager at VMware Sub-Saharan Africa, says that as we watch the amount of connected devices in businesses explode again and again with each passing year, we know that the amount of data being produced by these devices is also increasing at a rapid rate.

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June/July 2016

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the designer, to the manufacturer, to the transporter, to the consumer and product disposal, each of those components has an impact. Green supply management is the key to acknowledging the disproportionate environmental and social impact of manufacturing processes, and balancing ecology with economy in the supply chain process. Traditional supply chain management is very customeroriented, focusing on enhancing the strategic use of internal resources to deliver quality products to the consumer effectively. However, in this process, the effect of these products on the external environment, people, and resources is neglected. As a result of decades of carelessness, it is now a moral and business imperative that manufacturers from all corners of the globe integrate environmental considerations into their management mechanisms. Where and how companies choose to store the data produced by these devices is changing, and it’s not just because of a want to be more agile, but also because many companies are becoming aware of the environmental impacts and costs – especially with the sky rocketing price of electricity locally and of hefty hardware-based data centres. The emergence of cloud computing and the software-defined data centre (SDDC) has seen many companies reduce the amount of hardware they use for storage, and the less there is to plug into the wall, the less electricity businesses will use. The proprietary infrastructure at the heart of the enterprise is beginning to be replaced by commodity equipment running sophisticated management software that is able to stand in for the value-added features that have been built directly into hardware in the past. Businesses have the opportunity to strip off practically every unnecessary component in the data centre, which not only lowers power consumption but better exposes the internals for cooling, which means an energy usage reduction in another area. Virtualisation has a positive impact on power consumption by enabling companies to do away with unnecessary or under-used servers and run their existing hardware at higher utilisation rates. If the software is doing the thinking on behalf of the hardware, if it is reducing the amount of hardware needed, if it is reducing the number of people needed to manage it – then surely a bi-product is a reduction in resource, capacity, power and even devices. The benefit if which is a leaner and ultimately greener environment. Greening your supply chain Khululiwe Mabaso, CSI Associate Director for Sub-Saharan Africa at Procter & Gamble (P&G), notes that a product will go through multiple points of contact in its lifecycle. From

In African markets where we are confronted with a vast, culturally complex, underdeveloped continent with severe social challenges, sustainability may be regarded as a “luxury” that few can afford. Yet an ecologically enhanced approach to doing business is now a global imperative, and no longer an add-on optional extra. The focus must be on long-term investments, rather than short-term gains. With this in mind, the key to minimising external impact in the supply chain, and enhancing business benefits, is collaboration and aligned focus with partners. It is therefore important that companies establish strict criteria for evaluating the suppliers that they work with. When considering a supplier, buyers should take into account their compliance with environmental regulations, the effectiveness of their environmental management system and how they implement and monitor internal control procedures. Is the plan to streamline EIAs working? Chris Dalgliesh, Partner and Principal Environmental Consultant at SRK Consulting, says that regulations in place since December 2014 to streamline authorisations for Environmental Impact Assessments (EIAs) certainly seem to have accelerated the pace at which most government departments provide the necessary comment – but there are some teething problems. The new “One Environmental System” hastens the official authorisation process by synchronising timeframes for a full suite of permitting requirements – including water, waste, air and heritage permits – with EIA authorisation timeframes. The benefits have been greater certainty for developers and project managers, with clear milestones stipulated for decision-making processes. It also has successfully shifted the onus onto the commenting authorities – such as government departments and local authorities – to meet those time-

FEATURE

frames. The streamlined process, though, means that once the application is submitted there is little opportunity to reconsider elements of the project in the light of new information. Clients have had to shift their thinking to align with the new system and now only begin the authorisation process once a project is well defined, as opposed to defining the project in parallel with the authorisation process. Larger, complex projects, however, tend to benefit from more revisions over a longer period of time, especially revisions aimed at making projects more sustainable – and the jury is still out on the value of the new system in these conditions. Managing facilities Lloyd Dube, Accredited Facilities Professional and Member of SAFMA (South African Facilities Management Association), notes that in the last decade, facilities management service providers and property owners have seen an increase in the interest in and support for green buildings. From governments across the globe and the property development industry to private organisations and the general public, there is a growing trend towards fostering a sustainable and climate-friendly built environment. This trend has also affected the local property market, with the Green Building Council of South Africa (GBCSA) reporting that 50 buildings have been certified to date. Research conducted by McGraw Hill Construction has also shown that the rate of increase in the number of green buildings constructed in SA is higher than that of the USA, Europe, Singapore and Brazil. In practice, green buildings require a shift away from conventional building maintenance practices towards a strategy that enables compliance with energy efficiency needs, water use and waste disposal, as well as the use of recyclable material in construction, and the sustainable use of space, innovative use of technology and the utilisation of natural lighting.

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June/July 2016

maintenance team to preserve the surrounding eco-system and to gain an understanding of the need for and reasons behind the wet services designs. • The maintenance team can improve preventative and planned maintenance plans by aligning their maintenance planning to green building standards from inception, rather than at the tail end of the project. • The facilities management service provider should ensure that the maintenance team of these buildings attend GBCSA accredited training workshops, thus providing them with a complete understanding of the documentation requirement. This will also give them insights into other sustainability issues that they may not have been aware of, and will increase their understanding of emerging sustainable issues and technologies. • The facilities management service provider should ensure that maintenance managers are accredited by the GBCSA. The structured plan enables the maintenance team to create the planned and preventive maintenance strategies that are required to keep green features operating as intended, and in a much more coordinated way. Environmentally friendly digital light Businesses need to embrace the benefits of digital light, more commonly referred to as Light Emitting Diodes (LED), which provides environmentally friendly energy efficiency. While many old style businesses are bracing for the coming 9.4% Eskom adjustment, those clients that are embracing technology are seeing massive decreases in electricity expenditure while improving productivity, according to Relight Energy’s Director, Tristão Abro. Eskom requires much higher increases to ensure long term energy sustainability and thus growth in SA LED’s are today’s most efficient way of illumination and lighting, with an estimated energy efficiency of up to 90% when compared to traditional lighting and conventional light

aintenance requirements of a green building should be •M incorporated into the project plan from the beginning of the project. The maintenance team or facilities manager should be engaged in the entire life cycle of the project as they are responsible for ensuring the green status is upheld. • The maintenance team or facilities manager should not only be involved in the planning of the building, but should also take part in the selection of the site earmarked for the new building. This should help to ensure that green buildings are not put up on sites that are environmentally sensitive. This involvement also makes it easier for the

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bulbs. LED’s offer unique and compelling characteristics for industrial applications. They are more durable, reliable and lack the maintenance requirements (e.g. re-lamping, re-ballasting) associated with traditional lighting. There are many benefits to LED lighting. These include: a long life span and that diodes can have up to 100 000 hours of operation when used continually. That equates to 11 years. They also provide environmentally friendly energy efficiency, are durable use in either extreme hot or cold environments with no UV emissions. LED’s offer instant on and off, and frequent switching will not diminish the life span - the low voltage required makes it ideal for South African conditions outdoors or in remote and rural areas. Due to the robustness and longevity of LEDs, maintenance costs are dramatically reduced and in some cases completely eliminated. LED allows for flexibility in the design of lighting solutions resulting in highly efficient illumination and the delivery of high quality light, with no strobe-like flickering, to desired locations. There are many case studies around the globe that demonstrate that the right lighting can increase sales, productivity and even staff morale. By increasing our energy efficiency, we can improve our productivity across the economy. As Edison’s light bulb replaced and provided benefits over kerosene lamps in 1879, so too must LED replace the bulb.

responsible! Before you spend any money on technology, understand that unless you have changed the “hearts and minds” of your employees (and your fellow executives) in respect of resource savings; social responsibility; sustainability and other strategic issues, whatever you spend is pointless. The best technology and systems in the world still require human intervention and control, and this is where most companies fail on their sustainability journey. The quickest way to undermine your brand or your sustainability credentials is to “greenwash” your performance or promise of sustainability. By promising or committing to environmental or social responsibility, you have effectively entered into a contract with your clients and consumers of your product. By not meeting that promise – or by making unsubstantiated claims about your product or service, you do immeasurable damage to your brand, your reputation and your own name, so never assume that your own inhouse “eco-label” or untested claims are enough to ensure responsible business. Align yourself with a reputable external and independent label, and use that label to your advantage when selling or promoting your products or services. That is how consumer trust is built – not vague and often irresponsible marketing jargon. Possibly the most undervalued commodity that your business has is that of external verification – certification of performance. That is what sells products on a sustainable basis.

Apply common sense For many business owners, offering a more sustainable or Sustainability is a journey – not a destination. Sustainability responsible service or product is becoming an important is a long-term process and it requires a long-term, strategic part of their strategic plan, but knowing how to achieve view to succeed. n sustainability seems like a challenge that requires special skills, notes Greg McManus, Managing Director at Sustainable Benchmark Solutions International. Becoming a green business @bbrief1 CONTRIBUTORS can be as simple as applying common sense to the decisions that you make every day. It’s about considering the impacts South African Facilities Institute of Directors in that your products or services have on the environment; the Management Association Southern Africa +27 (0)11 430 9900 +27 (0)11 463 3904 community; your personnel; your consumers and of course, your bottom line. KPMG SRK Consulting +27 (0)11 647 7111 +27 (0)11 441 1111 A good starting point is accepting that becoming more Macfarlanes Standard Bank sustainable is not just a question of throwing money at +44 (0)20 7831 9222 +27 (0)86 012 3000 the problem. So much of what you can do to minimise Procter & Gamble STANLIB environmental and social impacts lies with simply working +27 (0)86 011 2188 +27 (0)11 448 6000 smarter and establishing “ground rules” for your employees Sustainable Benchmark Relight Energy and business associates. Establishing a workable and Solutions International +27 (0)11 440 2135 appropriate environmental management system – a system +27 (0)12 667 6658 SFM Africa of policies and procedures on how you expect the business to Sustainable Solutions +27 (0)11 327 6927 operate, is essential, and while it may seem an insurmountable +27 (0)21 680 5390 SmartMatta challenge – or extra work, in truth, this is a very simple VMware Sub-Saharan +27(0)31 902 3542 process. Africa You cannot buy yourself into becoming sustainable and

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EDUCATION & TRAINING

Skills cutting BEHEADS the future? The first quarter of 2016 is complete. The finance speech has been delivered, and most companies have begun re-evaluating their budgets for the next financial year. Understandably, most will be searching for cost-cutting avenues, contemplating what constitutes essential spend, and what they can do without. Unfortunately, in many instances, the choice is made to cut skills development budgets, a mistake that could cost the company a lot more in the long run.

kills development is essential to any business’ success – and that the lack of training will have dire consequences which far outweigh the cost saving benefit. An investment in skills development should be seen as a constantly appreciating asset. From decreasing high levels of staff turnover and costly recruitment drives, to spiking productivity, keeping up with technological changes and engaging staff, targeted skills development will always increase the

organisation’s ability to compete in established markets. Long-term pitfalls Cutting skills development budgets may seem to be the answer in the short term; but the long- term aftermath results in many unpleasant pitfalls. When skills development is not made an in-house priority, companies will be forced to offer higher salaries in order to hire staff that are already equipped with the required skills. This head-hunting cost can be avoided by identifying the staff already in the company’s ranks, and upskilling them to meet their potential. Talented employees that are not trained by their employers often feel undervalued, which leads to high staff turnover. For SMMEs in particular, survival depends on a loyal, constantly developing staff complement.

increasing skills development efforts and incentives by the government. The government’s (DoL, DoE and SETAs) investment in companies that assist them to develop the skills of the nation will be rewarded with better contributors to the GDP and improved job stability. As the South African economy remains uncertain, facing many serious challenges, the country is continuously losing highly skilled, well trained people to immigration. This increasing brain drain necessitates constant innovation and increased entrepreneurship, in order to survive economic downturns in a creative way. Through skills development, companies can successfully adopt the ‘adapt or die’ principles, ensuring that their workforces are multi-skilled, diverse and able to meet varying demands. If instant gratification is the endgoal, go ahead. Cut the training budget and enjoy the extra cash flow. Just remember that sound businesses are not built on instant gratification – they are built on effort, learning and a dedication to continuous improvement. Without skills development, and the consequent return on investment (a well-skilled, engaged workforce that delivers high quality and increased performance), achieving this becomes exponentially more difficult. n

Consumer markets, resources management, business performance, social demands, and other economic and political drivers all place increased pressure on people to have the skills to survive at work and generate liveable wages. Rising populations, downsizing of corporations, unemployment, job instability, technological changes and political By Mark Orpen instability Chief Executive Officer & Chairman all make The Institute of People Development (IPD) the case mark.orpen@peopledev.co.za for

EDUCATION & TRAINING

BusinessBrief

June/July 2016

Embrace ONLINE Education

he current speed of change means that employees need to be trained continuously in order for companies to avoid the dangers of being out-thought and outmanoeuvred by competitors. As such, skills development and training has become critical and millennials are already driving change in organisations resulting in the emergence of digital companies. Similarly, universities and business institutes need to evolve if they are to stay relevant to this new generation of student. More than ever before, technology is playing an important role in society and just as it has permeated corporate and personal lives, so too does it change learning. In fact, worldwide the E-learning market will show fast and significant growth over the next 3 years. The market for self-paced e-learning is expected to/will reach $35.6bn in 2011 and the 5 year compound annual growth rate is estimated at around 7.6% – reaching an estimated $51.5bn by 2016 – with highest growth rates in Asia at 17.3% followed by Eastern Europe, African and Latin America at 16.9%, 15.2% and 14.6% respectively. In a country where access to education is beset by many challenges, online training provides a more flexible, cost-effective, and efficient value proposition as it can be accessed from anywhere and at any time. We are also not limited by the number of seats available at a campus, but can reach an unlimited number of students around the world. Training can be highly customised with programme facilitators having access to real-time tracking of learning activities in order to monitor how students are progressing with coursework, assessments, and group learning. Furthermore, it provides the opportunity to study in their own time and at their own pace – while ensuring that there is little to no impact on current job performance. Moreover, research has shown that e-learning proves to be an excellent way to achieve quality results in a short timeframe. It is also considered strategic because it: eeps the workforce appraised of their job functions’ •K developing requirements • Aids succession planning – helping workers to acquire new skills • Allows organisations to keep training budgets under tighter control We have moved from individual to collaborative learning and have shifted from passive to active or brain-based learning. Learners no longer want to be content receptors taking down

By Dr Diane Bell Director of Academic Affairs USB-ED Diane.Bell@usb-ed.com @USB_ED notes as spectators, they want to be authors and problemsolvers and the web allows a plethora of data and the freedom to learning according to paths of their own choosing. As such, to provide the best possible learning experience, organisations have to adapt and find ways to meet the changing needs of their employees. They must also understand and embrace the meaning and the implications of these changes in the learning process and cultivate it as part of their HR and skills/talent development policies and initiatives. The world is changing and traditional business models are shifting. Digital and online has infiltrated all parts of business – with workers looking at remote working and flexible hours. What’s more, millennials entering the workplace have provided new expectations when it comes to work – which means the status quo is being challenged. We are moving towards smart cities and digital citizenry – and this is also filtering into how people are choosing to learn. School systems are changing, universities are providing access that was never available before and the same is happening from a talent and skills development point of view. People want to empower themselves – whether it’s for their current role or for something new and different – and online learning is providing a perfect platform to take that empowerment to the next level. Make sure your business is supporting this movement. n

BusinessBrief

June/July 2016

EDUCATION & TRAINING

Entrepreneurs in education!

A is eager to find solutions to the current problems that face the education sector ranging from lack of adequate schooling and accommodation facilities to a declining matric pass rate. To complement government initiatives, a potent mix of passion for education and an entrepreneurial mind-set is needed to turn the current education crisis into a sustainable opportunity within the industry. While there is a gap in the market to improve the education sector, obtaining finance for education facilities has traditionally not been easily accessible in SA. He says that this was as a result of local financiers regarding this type of investment as high risk due to the specialised nature of the sector and the compliance requirements that are expected by the Department of Basic Education. Due to the huge demand within SA to improve and expand the sector, funds are required to aid SMEs that are seeking to augment the shortcomings in the education system with innovative, viable or scalable projects. Large funds are required for companies operating in the pre-primary education level, followed by school centres and crĂ¨ches. However, there is also a growing need for financing amongst private primary and high school owners, with nine institutions having

By Gerrie van Biljon Executive Director BUSINESS/PARTNERS gvanbiljong@businesspartners.co.za @BizPartnersLtd recently received funding via the Education SME Fund. Private schooling is becoming a focal point as more parents acknowledge the value of good education.

Funds are required to aid SMEs that are seeking to augment the shortcomings in the education system With approximately 25 800 public schools and only 1600 independent schools in SA, we are increasingly noticing a demand for private schooling and alternative education facilities, especially in the middle income bracket where education fees are typically R40 000 per annum. Parents are now more willing to spend more for peace of mind that their children are receiving the right attention and quality of schooling. Although a number of student accommodation facilities were funded, there remains a strong demand for student accommodation as evident from the recent student protests. There are an estimated 530 000 students that are in need of accommodation and only 110 000 spots offered by the universities or other educators, with the balance offered privately. While investment in student accommodation offers moderate returns, it is a long term investment which reaps long term benefits. There are opportunities within the education sector, and as such we should continue to fund SMEs with the aim of turning the country's educational challenges into opportunities for sustainable development and contribute to job creation and growth of the South African economy. n

EDUCATION & TRAINING

BusinessBrief

June/July 2016

Alumni support tertiary education

he doors of learning and culture in SA are still not open to all. Access to tertiary education continues to depend not so much on students’ academic abilities, but on their class position. Even where poor students are admitted to universities and some of their fees paid, their experience at tertiary education institutions is often undignified and leads to low levels of success. Many often go hungry, or have problems securing the accommodation, text books and money needed to be academically successful.

SASSFE is a movement that aims to build on the fundamental view that all students, regardless of their socio-economic standing, can achieve at the highest level when given access to resources and proper support. n

This cannot be allowed to continue in good conscience. SASSFE aims to mobilise significant financial support for the tertiary education sector in SA and perhaps redefine the way in which past, present and future generations of students in SA relate to each other. Providing a platform One of the objectives will be to provide university alumni with a platform and opportunity to take on an active and voluntary role in supporting students in need. The private sector and any other members of society can make small but regular donations to a SASSFE Fund that will make higher education accessible to all students, irrespective of class. The burden of ensuring that all poor but deserving students can have access to higher education cannot be borne by the students themselves and alone, but by society and in particular by those who have previously had access to higher education. This must, however, be done voluntarily and independently and the funds must be managed by those who give them in partnership with the universities. This is our nation building moment. Many students, including those that receive NSFAS support and the so called “missing middle”, continue to suffer the indignity of hunger and homelessness on our campuses. We must tackle this problem bottom-up until all deserving students can study in dignity. Where are all the leaders of the various societies on campus over the years, all the leaders of the house committees, all former students of conscience, all activists, all students and all others who care about a future where higher education is accessible to all?

By Archbishop Thabo Makgoba Chairperson South African Student Solidarity Foundation for Education (SASSFE) archpa@anglicanchurchsa.org.za @SASSFE

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June/July 2016

LEGAL

E-signature exceptions! In SA, e-commerce, and more specifically e-signatures are governed by the Electronic Communications and Transactions Act, 2002 (ECTA).

hanks to ECTA, our law recognises that:

data message, like an email, •a SMS or any other electronic document, has the same legal effect as a fax, letter or other hard copy document; and • an electronic signature, like a digital, scanned or advanced electronic signature has the same legal effect as an original signature on a hard copy document. In terms of ECTA, any document, with the exception of those

documents mentioned below, can be signed electronically. The type of e-signature to be used (digital or advanced) is determined by law or by the signatories themselves and, provided it meets the requirements for a valid digital or advanced e-signature, as set out in ECTA, these e-signatures will be given due evidential weight in any legal proceedings. The great thing about advanced e-signatures in our law, is that when a document is signed using an advanced e-signature, that document is presumed to have been signed properly. This means that any person disputing the validity of that signature will have to prove it in court. E-xceptions to e-signatures Unfortunately, as mentioned above, there are certain exceptions to electronic documents and signatures in our law. In terms of ECTA, the following documents will not be accepted in electronic format and cannot be signed electronically: n agreement for the sale •a of immoveable property, as provided for in the Alienation of Land Act, 1981; • a long-term lease of immoveable property in excess of 20 years; • t he execution of a bill of exchange, such as a cheque, governed by the Bills of Exchange Act, 1964; and • t he execution, retention and presentation of a will or codicil, as governed by the Wills Act, 1953.

Although ECTA does not specifically deal with documents that need to be registered in any of the Deeds Registries in SA, the Chief Registrar of Deeds resolved, in 2006, that e-signatures will not be accepted for any act of registration in a Deeds Registry in South Africa, as only originally signed documents are permissible. Therefore, any documents that need to be registered in any of the Deeds Registries of SA will also not be accepted in electronic format and cannot be signed electronically. Can we go paperless? It is clear that our law on electronic transaction and e-signatures have developed significantly over the past decade. E-commerce is booming and electronic documents and e-signatures are starting to feature more and more during transactions. But does this mean that we will be giving those originals and hard copies the boot and move into a paperless paradise anytime soon? Probably not. Perhaps in a few years’ time, if our deeds registration system has gone electronic and we no longer have any exceptions to electronic documents and e-signatures, the answer to this question will be different. But for now it seems that originals and hard copy documents still have their place in our law, and they won’t be leaving us just yet. n

By Izanne Geldenhuys Associate Hogan Lovells (South Africa) izanne.geldenhuys@hoganlovells.com @HoganLovells

LEGAL

BusinessBrief

June/July 2016

JAIL for competition’s ACT!

ecently, Government announced in Presidential Proclamation No. 25 of 2016 that those sections of the Competition Amendment Act, 2009 that provide for criminal sanctions will come into effect on 1 May 2016.

up to the next level in the fight against corruption, cartels and anti-competitive practices. The writing on the wall since 2009 has now become a reality. The implementation of criminal sanctions is deemed as an enabler to accelerate South Africa’s weak economic growth. Economic growth is retarded by cartel activity, which is deemed the most harmful of all anticompetitive conduct, as it results in firms reducing output, charging higher prices to consumers, limited consumer choice and reducing incentives for firms to improve efficiencies and engage in innovation.

The thinking around competition law compliance and competition law risks has changed. Going forward competition law compliance will, and indeed should be, ranked as the highest regulatory risk by all company Boards and Executives. This also raises the importance of dawn raid preparedness. With effect from 1 May 2016 it will be a criminal offence in SA for directors or managers of a firm to collude with their competitors to fix prices, divide markets amongst themselves or collude in relation to the award of tenders. It will also be a criminal offence to acquiesce in collusion, in other words having actual knowledge of the collusive conduct and failing to take any action to prevent it. Any director that involves themselves in these forms of collusion, inevitably expose themselves to jail time if found guilty. Since the inception of the Competition Act in 1998, public awareness around cartel and collusion activities started peaking, with the authorities having made high profile inroads in breaking up cartels. As stated by Minister Patel in Parliament on 21 April 2016 during his budget vote for the Department of Economic Development, Government is confident that their work on cartels, especially over the past 5 years, has provided market participants with the necessary clarity as to what exactly prohibited practices are. Therefore, he said, the efforts of the competition authorities can now be stepped

It is now evident that the term “compliance with competition law” has moved beyond its traditional narrow meaning in SA. Without a solid foundation of competition compliance in companies, that addresses the potential risk issues relating to competitor interactions, value for the company shareholders will be eroded. Considering the above personal consequences, a company director or manager might face due to a lack of compliance within an organisation, directors and managers should ask themselves the following question “How do I ensure that I will not be held criminally liable for my company’s actions?” Certainly, if you are aware of suspicious conduct in your firm, now is the time to seek clarity. n

By Ahmore Burger-Smidt Director Werksmans Attorneys absmidt@werksmans.com @Werksmans

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LEGAL

The Sanctity of Sanctions!

ay an employer alter a decision of a disciplinary tribunal constituted in terms of a disciplinary code, which is a product of a collective agreement? This was the question before the Labour Appeal Court (LAC) in SARS vs CCMA & Others to which the Court responded in the negative. In doing so the Court emphasised that the employer does not have the power to overturn a decision of its own disciplinary tribunal, as the tribunal is an extension of its hand when it comes to matters of discipline in the workplace. The Court found that the decision on a sanction rested with the chairperson of the disciplinary enquiry, and this in turn, invalidates any opposing decision of management, in which it seeks to interfere with the decision of the chairperson.

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The Court emphasised that the employer does not have the power to overturn a decision of its own disciplinary tribunal The Court also emphasised that the enquiry into the fairness of a dismissal should not be taken any further once it has been established that the employer does not have the necessary authority to interfere with the sanction imposed by the tribunal. There is a mechanism contained in section 158(1) (h) of the Labour Relations Act 55 of 1995 (the LRA), that enables the State, as an employer, to review the decision of its own chairperson but the court labelled this provision as one that is anomalous and the mechanism was not invoked in this case. The LACâ&#x20AC;&#x2122;s approach thus is clear that employers are bound by the disciplinary code and procedures as envisaged in the collective agreements and amendments to the agreements may only be made through collective bargaining. n

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Shareholder

or company loss?

n the matter of Itzikowitz vs Absa Bank Limited, the Supreme Court of Appeal (SCA) provided clarity on the distinction between delicts committed against a company and those committed against a shareholder; and whether such a shareholder has a right of recourse against the party who committed such delicts. Gary Itzikowitz (Itzikowitz) sought to recover from Absa Bank (Absa) the amount of the reduction in the value of his shareholding in Compass Projects (Pty) Ltd (Compass) – a company that held shares in Quantum Properties Group that, in turn, wholly owned A Million Up (Pty) Ltd (AMU): the company against which the alleged delict was committed. Itzikowitz alleged that AMU’s demise and, in turn, the reduction in the value of his shareholding in Compass resulted from the alleged intentional, reckless or negligent conduct of Absa. Itzikowitz maintained that Absa owed a legal duty to act as a “reasonable banker” and “not to take any decisions or to engage in any business conduct which could adversely affect the value of shares in AMU, or the value of any loan account in AMU in material respect”.

The claim was thus a delictual claim for pure economic loss. The court confirmed the Constitutional Court’s view in a different matter that conduct which caused pure economic loss is not prima facie wrongful – the plaintiff must be able to demonstrate a

By Hayley Laing Senior Associate Cliffe Dekker Hofmeyr Dispute Resolution Practice hayley.laing@dlacdh.com @DLACDH

right or legally recognised interest was infringed. If no wrong was committed against the plaintiff there can be no claim. In approaching this enquiry, the court considered certain fundamental principles of company law, namely the nature of the company as a distinct legal personality, separate to that of its members. As such, the property of a company belongs to that company and not its shareholders. A shareholder’s right in relation to the company is simply a right to participate in such a company on the terms of the articles of association. Due to these fundamental principles, the court emphasised the importance of determining whether the shareholder has a claim against the wrongdoer which is separate and distinct from any claim which the company may have against such wrongdoer. This determination turns on whether a wrong was committed against the shareholder, the company, or both the shareholder and the company. In essence, if no wrong was committed against the shareholder, then they are not entitled to recover damages from the wrongdoer. Thus the shareholder in the Itzikowitz matter could not go after Absa for the alleged wrongdoing. Moreover, whether or not the wrongdoer acted intentionally or negligently is irrelevant for the purposes of such an enquiry. Thus when a party breaches a legal duty owed exclusively to a company, which results in a loss to that company, only that company may sue in respect of that loss – as opposed to a shareholder who is merely invested in the company. Consequently, the shareholder cannot rely on a breach of a legal duty owed to the company in order to recover from a drop in the value of his shares. n

BusinessBrief

June/July 2016

LEGAL

A case of mistaken IDENTITY The story of Ms R.A. of Tampa Bay, USA, is a worrying example of how using social media and the web for recruitment purposes may backfire.

s A. applied for a full-time job as the office manager of a construction company. After meeting with representatives of the company she was offered and accepted the position. Before she started work, the company checked her online activity and found a police mug shot of someone with the same name. Instead of confirming that their new employee was the same “R.A.”, the company gave her position to somebody else. When she found out about her replacement, Ms A. had a background check performed on herself. This background check showed that she had a clean record and was not the “R.A.” of the mug shot. She forwarded this background check to the company, but her position had already been filled. Companies and recruiters often turn to social media and search engines to vet prospective employees. While these are useful tools, it is important that employers and recruiters are mindful that the information obtained as a result of a search may be inaccurate and may, as in the case of Ms A., relate to someone completely different. There are millions of people who use the web and social media platforms. It is not uncommon to come across people living in the same area, who have the same name. This could pose significant problems unless care is taken in verifying information obtained from social media and the web about prospective employees. It is a simple fact that the online

By Rosalind Davey Partner Bowman Gilfillan r.davey@bowman.co.za @BowmanGilfillan world has brought everyone much closer together and the likelihood of your virtual doppelganger being found on the internet increases daily. In order to avoid cases of mistaken identity, companies should approach information gleaned on the web and social media sites with caution. Acting on this information without, at the very least, checking its accuracy, is a risky practice that may result in legal action.

It is important that employers and recruiters are mindful that the information obtained as a result of a search may be inaccurate... In South African law, once a job applicant has accepted a job offer, the employment relationship commences. Thus, had Ms A. been employed in SA under South African law, the company’s conduct in replacing her would have amounted to a dismissal, which, given the facts, would likely have been found to be unfair. Furthermore, companies may face claims of unfair discrimination and breach of contract should they terminate a candidate’s employment due to a problematic background check conducted via the web or on social media. Additionally, if the company or recruiter discloses information pertaining to the background check, the candidate may well have a claim for reputational damage. To avoid potential claims arising out of cases of mistaken identity, companies should finalise background checks before offering employment to a candidate and check the accuracy of the information obtained before acting on it. n

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TAX

TAX HAVENS:

Will the BUBBLE burst? The recent “Panama Papers” scandal illustrated how wealthy individuals and companies have taken advantage of “tax havens” or “secrecy jurisdictions” and managed to keep their financial affairs relatively private. However, the concept of using a tax haven with an attractive tax regime and a high degree of secrecy is an age-old notion used legitimately for tax planning purposes. Tapering the red Inherently, tax havens are countries or jurisdictions offering certain tax benefits such as lower tax rates, credit mechanisms or deductions resulting in limited or no tax being levied on certain profits. Generally, tax havens offer businesses less red tape than other countries that have complicated exchange controls, labour and equity requirements. This contributes to the overall ease of doing business in these countries. Shelling out There is no question that some individuals and companies may use tax havens illegally purely to evade tax. This usually involves creating shell companies or “letterbox” companies with no economic activity in order to hide profits and benefit from lower tax rates than in their true home jurisdictions. This could force companies to consider the reputational consequences of their

actions. Nevertheless, tax havens can be used legally in tax planning where profits are properly attributable to the tax haven and sufficient economic substance is maintained. For example, companies seeking to operate within a tax haven should, in essence, be managed and controlled from that jurisdiction and have sufficient operations that can justify their tax residency. Consequently, many multinationals may find it attractive to take up their headquarters or perform certain activities within a tax haven to achieve a more favourable tax position than if these activities were undertaken in another jurisdiction. Withhold this… Globalisation has led to large corporations extending their structures across foreign boundaries with a considerable thought on the future tax implications. Different countries tax profits in different ways; some have lower or no withholding tax rates and others do not levy taxes on certain transactions. Innovative hiding places One of the most popular ways tax havens are being used by multinationals is for the protection and exploitation of intellectual property. In this way, intellectual property is held offshore and licensed to other group entities in various countries. All foreign sales and licensing fees will then be attributable to the tax haven. In some cases, licensing fees may be subject to royalties’ withholding tax at a rate much lower than the corporate tax rate in those jurisdictions. This makes it more tax efficient to hold and manage the intellectual property centrally via an entity

By Louise Vosloo Deloitte Africa Taxation Service Cross Border Tax Lead lvosloo@deloitte.co.za @DeloitteSA

TAX

situated in a tax haven. Therefore, tax havens have made efficient tax planning for multinationals achievable with relative ease.

Globalisation has led to large corporations extending their structures across foreign boundaries with a considerable thought on the future tax implications

Exploiting loopholes One may wonder why tax havens allow individuals and companies such advantageous tax benefits and the associated secrecy. Most tax havens are not largely industrialised and do not require the enforcement of a large tax base. These havens maintain attractive tax regimes and minimum formalities to attract foreign investment, create employment opportunities and to encourage a transfer of skills to their jurisdiction. These countries have also encouraged unfair tax competition due to a reduction in the tax base of other countries where taxes would have been due and payable. BEP your pardon? The Organisation for Economic Cooperation and Development (OECD) has developed various actions plans to combat tax Base Erosion and Profit Shifting (BEPS). The BEPS

project is aimed to reduce schemes used to shift profits offshore, often to tax havens. One of these measures is country-by-country reporting, which requires large multinationals to report their global tax affairs to their local revenue authority for information exchange with other revenue authorities. Still opaque? Through this, transparency will be enhanced and tax administrations will have adequate information to assess transfer pricing and base erosion risks. More importantly, transfer-pricing rules are combatting the improper allocation of group profits and expenses across borders by enforcing arm’s length principles. BEPS is now taking it further by applying pressure to all tax havens

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BusinessBrief

June/July 2016

that are attracting foreign investors without requiring any economic substance.

Take action! In light of this, worldrenowned tax havens, such as Mauritius, have started to implement substance requirements to combat tax haven abuse. Much of these substance requirements relate to having a local presence in the tax haven as well as maintaining effective management and control from within the jurisdiction. Consequently, companies are denied any tax benefits where these requirements are not met. BEPS action, plans and the drive for increased information exchange through country-by-country reporting, tax havens can still be used legally by multinationals. This can only be achieved where companies are willing to operate transparently with sufficient economic substance and are prepared to put the appropriate structures in place. n

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TAX questions to ASK By Yolandi Esterhuizen Legislation Manager Sage HR & Payroll Yolandi.Esterhuizen@sage.com @SageGroupZA

t’s tough out there. Entrepreneurs need to do more with less and keep an eye on changes in the tax legislation, as these could affect their payroll calculations and the tax they need to pay on behalf of their employees. Some legislative changes (as included in the amendment Acts and reiterated in the budget speech), such as employee contributions to retirement funds, will most probably have an impact on the company’s payroll systems. Tax questions every small business owner should be asking: hat is happening with the •W Employment Tax Incentive (ETI)? The 2016 Budget indicates that the ETI will be reviewed in the third quarter of 2016 with a view to extending its life for another year. It is still debatable whether ETI has been effective in addressing the crisis of youth unemployment. If the legislation is to be renewed, it needs substantial changes to make it more effective and to encourage wider participation by businesses. Areas of difficulty: •P utting the responsibility for minimum wage compliance into the ETI Act has compromised its simplicity and effectiveness. •T he three-step formula used to calculate the monthly incentive, results in complicated and poorly understood ‘grossing-up’ calculations that the payroll must perform if a ‘partial month’ is worked.

• I f employers claim the monthly incentive in a month in which they are inadvertently not tax compliant, penalties and interest can be the result. This risk is too high in the opinion of some employers. Generally, some employers are of the opinion that the administrative costs and risks outweigh the financial benefit of the incentive. I am hopeful that pragmatic changes to the ETI Act can address these challenges and improve its effectiveness as a way to boost youth employment rates. ill there be any changes to •W employee contributions towards retirement funds? Yes. From March 2016, any employee contributions towards a retirement fund (pension, provident and retirement annuity) are tax deductible, subject to a limit which must be applied by the employer. Previously, contributions towards a provident fund were not tax deductible. The employee may contribute more than these limits, but he/she will only receive the tax benefit up to the statutory limit. Any contributions made by the employee in excess of the limits will reduce the taxable value of any lump sum paid in future. m I obliged to register with •A SARS for skills development? Yes. All employers registered with SARS for employees’ tax purposes in terms of the Fourth Schedule of the Income Tax Act, must register with SARS for skills development, irrespective of whether they are excluded from paying the levy by one of the following conditions: •a ny public service employer in the national or provincial sphere of government, •a ny national or provincial public entity, if 80% or more of its funding

comes from government, • any religious or charitable institution, •a ny municipality in possession of a certificate of exemption, •a ny employer where the total annual remuneration for the next 12 months is not expected to exceed R500 000. as there been any change to •H the income replacement policies since 2015? No. Since March 2015 premiums towards an income replacement policy were no longer tax deductible and this remains the same. It has not been affected by the changes to retirement fund contributions and how it should be treated on the payroll. re medical aid contributions •A still no longer tax deductible on the payroll for employees who are 65 years or older? Yes. Since March 2014, medical aid was no longer tax deductible for employees who are 65 or older. If an employee contributes towards a medical aid, the employee will be entitled to a tax credit amount. However, effective from March 2016, these individuals will also be allowed an additional medical tax credit on the payroll. This value is calculated by allowing 33.3% of the value of the medical aid contributions which exceeded 3 times the normal medical tax credits. The global economy is powered by SMEs. Economic stability, growth and employment are reliant on the success of SMEs. Entrepreneurs are the drivers of potential prosperity. This will only be possible if tax legislation and the country’s fiscal policy supports this section of the economy. n

TAX

BusinessBrief

June/July 2016

Relief for offshore assets?

reasury has announced a special voluntary disclosure programme (VDP) in respect of taxpayers’ offshore assets and income. The background to the new VDP is that from 2017 the standard for the automatic exchange of information between tax authorities will provide additional information to the South African Revenue Service (SARS) about taxpayers’ offshore assets. Through the special VDP taxpayers are given a limited opportunity to regularise both their tax and exchange control affairs before SARS acts on information they receive. Taxpayers have been offered a six month window period for the special VDP starting on 1 October 2016 and closing on 31 March 2017. According to the draft Bill, individuals and companies who are residents on 29 February 2016 may apply in their own name or on an initial “no-name approach”. Trusts do not qualify for the special VDP, however, donors and beneficiaries of offshore trusts may, if they elect to have the trust’s assets and income to be deemed to be held by them. The relief granted to the successful applicant includes: •O nly 50% of the seed money used to fund the acquisition of offshore assets will be included in taxable income; • I nvestment returns received or accrued to the taxpayer before 1 March 2010 will be exempt; • I nterest on the tax debts arising from the disclosure will only commence from 1 March 2010; •N o understatement penalties; •E xemption from prosecution for tax offences. The South African Reserve Bank will also be offering residents the opportunity to regularise their exchange control affairs through the special VDP process. Applications for exchange control relief are made pursuant to the provisions of Regulation 24 of the Exchange Control Regulations, 1961. Applicants who are granted relief for unauthorised foreign

By Graeme Palmer Director in the Commercial Department Garlicke & Bousfield Inc graeme.palmer@gb.co.za assets or structures may have to pay a levy based on the current market value thereof at 29 February 2016. The conditions that apply are that 5% of the leviable amount will be payable if the regularised assets or the sale proceeds thereof are repatriated and 10% if they are kept offshore. The levy must be paid from foreign sourced funds failing which an additional 2% will be added to the extent local assets are used to settle the levy. Individuals cannot deduct their R10 million foreign capital allowance or any remaining portion thereof from the leviable amount and the levy may not be reduced by any fees or commissions. n

BusinessBrief

June/July 2016

FINANCE & EQUITY

King IV & executive remuneration

he draft King Report on Corporate Governance for South Africa (King IV), released 15 March 2016, recommends that Boards ensure remuneration is used to, create value in a sustainable manner considering the economic, social and environmental context in which the company operates – clearly recognising the link between reward and organisational behaviour. Due to the tension between the need to understand directors’ remuneration levels and the methods to determine remuneration, and the directors’ desire for the privacy of their financial affairs, remuneration of directors is one of the most debated topics in the corporate governance arena. In SA this tension is exacerbated by high levels of inequality between employee and executive remuneration. In line with international developments, King IV re-iterates the fundamental ethical leadership characteristics of accountability and transparency by requiring disclosure of remuneration. To meet these disclosure requirements, the Board is required to have an intimate understanding of how value creation, performance and reward are linked in the business. This substantial enhancement in disclosure aligns King IV to international trends where transparency is at the forefront of the governance agenda. Moreover, such disclosures enable stakeholders to make an informed assessment of the performance of the company and its ability to create value in a sustainable manner. In the process, these remuneration disclosure requirements will provide benchmarks enabling comparative analysis of remuneration between companies. King IV also recommends that shareholders be provided with the opportunity to pass separate nonbinding advisory votes on the policy and its implementation. If either the remuneration policy or the implementation report is not adopted by a vote of at least 75%, compulsory shareholder engagement is required - along with disclosure of the steps taken by the remuneration committee to engage shareholders. Boards should establish a remuneration committee, the role of which is to

By Dr Johan Erasmus Director Deloitte jerasmus@deloitte.co.za @DeloitteSA recommend to the Board a fair and responsible companywide remuneration policy that promotes the creation of value in a sustainable manner. Interestingly, the social and ethics committee is tasked with ensuring that executive remuneration is fair and reasonable within the overall employee remuneration context. The Board, in conjunction with the remuneration committee (and to some extent the social and ethics committee), will need to clearly articulate the link between strategy, sustainable value creation, performance and remuneration. In SA especially, stakeholder activism is an important consideration for the Board particularly in light of the often contentious remuneration discussion. King IV recommends that the board ensures and oversees regular dialogue with shareholders. This dialogue should create and maintain a mutual understanding of what performance and value creation looks like for the purpose of evaluating the remuneration policy. King IV’s bold move to go beyond the numbers and interrogate the underlying basis for remuneration aligns SA with international trends in which accountability and transparency are at the forefront of the corporate governance agenda. While these recommendations build on the disclosure requirements in the Companies Act, they take it a step further by proposing that Boards identify and illustrate a clear link between the performance of the company and the remuneration received by each executive. More generally, linking remuneration across the organisation with sustainable business outcomes forms part of the strategy for driving long term performance and value. n

FINANCE & EQUITY

BusinessBrief

June/July 2016

An alternative exchange? South Africa is considered by many to be an ideal entry point into the rest of the continent. Additionally, ICT development and infrastructure enhancements see the country leading the charge for technology innovation. Despite this, there has been a hesitance to establish an additional equities exchange to further develop and deepen the capital markets in the country and this needs to change. By Adv. Fay Mukaddam CEO 4AX fmukaddam@4ax.co.za

ith more South Africans looking at expanding their financial portfolios in an increasingly competitive economic market, they are often limited by the options currently available to them. While the existing exchange fulfils a specific requirement, there has to be an opportunity for a different platform design to meet other, more diverse needs.

One of the biggest stumbling blocks for many have been understanding not only the financial jargon involved in equities trading, but also how day-to-day trading works. In an age where userfriendliness and accessibility are keywords in technology and other industries, financial markets also need to evolve and embrace this.

In addition, having an alternative platform can cater for rising small to medium businesses and even black industrialists who want something different to invest in without being encumbered by a traditionalist approach. A developing market requires a platform designed to benefit growing businesses. The South African regulatory landscape and customised listing requirements mean the opportunities for a more flexible exchange are significant. By pushing a simplified listing requirement agenda, such an exchange would be appealing for smaller businesses who are often intimidated by the cost and processed involved in becoming a listed entity. Naturally, this does not have to come at the sacrifice of compliance. There is opportunity to centralise key functions and reduce the number of role players involved in the process to streamline transactions.

An alternative platform can cater for rising small to medium businesses and even black industrialists

Having an alternative exchange that caters for this very basic requirement will lead to further diversification in the market. It will also help to cross the accessibility barrier of financial trading. Being intimated by the process sees many people opting to invest in stokvels instead of equities. While there is nothing wrong with that, the more choice that exists the better to stimulate a growing economy. Cynics argue that an additional exchange will place undue pressure on a country that has been bombarded by the likes of investor downgrades and volatility in the currency market. Yet, for these very reasons, an alternative can fill the gaps in the market and contribute to the country. With significant untapped capital circulating in communities, can we really ignore the potential for economic stimulus that a new exchange would provide?

Another benefit of a new exchange is its ability to leapfrog legacy systems and introduce the latest technology based on tried and tested systems being used in other markets. Just think about the potential that introducing the likes of mobile trading in South Africa will have on growing the market. All of this points to creating job opportunities and establishing new and different options for investment. People have embraced the connected and digital landscape in ways previously unimagined. By having an alternative exchange presenting the best in compliance, technology innovation, and business stimulus, the South African market is set to usher in a new age of investment opportunities. n

BusinessBrief

June/July 2016

FINANCE & EQUITY

New FINANCE REGIME looms! Parliament and the nine provincial legislatures are expected to receive unfavourable audit outcomes for the financial year ending 31 March 2016 due to non-compliance against new financial management legislation which fundamentally changes the current reporting environment.

he Financial Management of Parliament Amendment Act came into effect on 1 April 2015, and seeing that the legislature’s financial year end is March 31, it means that it has reached its deadline to comply with the requirements of the new Act. The consequences of non-compliance are far reaching as any shortcomings by the legislative sector, which are the oversight authorities over other government departments and entities, will set a negative tone for many government entities, especially when so many departments are already plagued by their failure to receive clean audits from the Auditor General. The crafting of a separate legislation to the Public Finance Management Act (PFMA) and Municipal Finance Management Act (MFMA) is anchored on the Constitutional doctrine of separation of powers between the three arms of government – executive, legislative and judiciary. Prior to this recent financial reform, Parliament and Provincial Legislatures were operating under the spirit, and not the letter, of the PFMA and its treasury regulations. Accounting Methodology To date, the legislative entities have used a simpler modified cash basis methodology. The new legislation requires an accrual and technical accounting for income recognised when earned and expenses when incurred. Most of the provincial legislatures run

By Kaya Mfono Associate Director: Public Sector Advisory Grant Thornton kaya.mfono@za.gt.com @grantthorntonza

on the outdated cash basis accounting systems which can’t process the more complex accrual accounting data.

a cause for concern and indicative that authorities are having difficulties in coming to terms with the new regime.

In addition many government departments are preparing their financial statements in accordance to a modified cash basis of accounting whereas municipalities are preparing their financial statements in accordance to standards of generally recognised accounting practice (GRAP). The compliance on GRAP standards will add additional complexity to the accounting process.

Improving Oversight The new Act abides by King 3 code on corporate governance principles, and thereby requires that an independent, multi-party oversight mechanism be established to hold the institution’s financial officers to account. This mechanism will oversee all financial issues on a quarterly basis to ensure that institutions comply with the letter of the law. To date there has been no indication that an oversight mechanism has been established in any of the legislative entities. In our analysis we found that inefficiencies are evident and that the national and provincial legislatures are running behind schedule for putting in place a mechanism to be implemented and they have not yet tested what the Act requires.

This is a specialist field of expertise as all GRAP standards are developed by the Accounting Standards Board and set out the recognition, measurement, presentation and disclosure requirements for financial reporting in the public sector. Developing New Regulations The new Act puts the powers to prescribe regulations applicable to the legislative arm of government at the executive authority of Parliament and not at the Minister of Finance or National/Provincial Treasury as under the PFMA and MFMA. In the new dispensation Parliament will prescribe new regulations on, among others, the funding of political parties and members represented in Parliament and Provincial Legislatures; procedures for recovery of fruitless and wasteful, unauthorised and irregular expenditure; remission of money due to Parliament and Provincial Legislatures; asset management; unsolicited offers; cash management; and investment policy. The fact that to date only one regulation – dealing with supply chain management – has been approved is

The new King 4 Code on Corporate Governance is expected to come into effect on 1 November 2016 and this too will affect reporting requirements towards the end of this year and into 2017. As the Auditor General prepares to start with its auditing process for Parliament and Provincial Legislature post 31 March 2015, it would take some time before the institutions could develop the requisite capability. It’s understandable that Parliament and the provincial legislature specifically will need time to build up the competencies required to comply with the new financial regime. The challenges notwithstanding, the institutions do have to lead by example and set the tone for sound corporate governance and clean audits regime across the public sector. n

The tooth FAIRY fraud? By Cornelia Niemand Associate Director KPMG in South Africa Cornelia.niemand@kpmg.co.za @KPMG_SA

PMG has launched the “Corporate Failures” publication which, among other things, discusses corporate failures and the nature of fraud causes. The publication stipulates that humans seem to be fascinated by fraud. Some do it and eventually, so it seems, believe that they have created magic. Others stand in shocked astonishment observing the demise of companies, ensuing court cases and media blazes seeking answers, pointing fingers and never arriving at a satisfactory explanation of the chaos left behind. The simple analogy of the tooth fairy does create a number of interesting questions about fraud, which the publication attempts to answer. Children accept the unpleasant task of losing part of themselves with the ensuring ramblings of parents about a magical creature bringing money/rewards in exchange for little treasures. Is this fraud? Is this unethical? Or are we all just looking for a little bit of magic in a world that is hard to comprehend? This publication reveals that it was not only auditors that have been in the firing line following corporate failures. CEOs and boards have also been called to task on the execution of their duties and why fraud occurred under their management and oversight. Leaders in corporate failures have been sentenced to jail, paid substantial fines and walked away with reputations a little less intact. Various authors have highlighted the character traits of leaders of failed corporates. Much research has been done globally to measure fraud and many articles have

been published recommending additional mechanisms to prevent and detect fraud. Court sanctions of convicted fraudsters do not appear to deter and additional legislation and regulation appear to have little impact in reducing the occurrence of fraud and, hence, corporate failures. An approach to RiskBased and Behavioural Investigations should focus on the various elements of fraud, i.e. motivation/pressure, rationalisation, opportunity and capability. A variety of factors contribute to fraud, for example, greed, ambitious corporate growth, deceptive reporting practices and lack of transparency, excessive interest in maintaining stock prices, executive incentives, stock market expectations, incompetent or ineffective boards, dominant CEOs, pride and the desire for power. Considering the wide variety of causes observed in the corporate failure case studies, the challenge of detecting and deterring fraud is therefore not easy to solve due to the numerous role players, possible scenarios and the unpredictable nature of individuals. The obvious question is then how to apply the broken windows theory to corporates in an effort to detect and deter fraud. It must be understood that fraud does not always result in corporate failure, nor do corporate failures occur only as a result of fraud. However, in some of the biggest corporate failures across the globe, fraud was involved. Experience has shown that individuals who are dissatisfied with certain procedures or decisions have a tendency to disregard policies and “bend” the rules or “expedite” transactions in a particular way. This creates the impression that everybody could get away with inappropriate behaviour and more loopholes may be exploited by others in the organisation. n

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BusinessBrief

June/July 2016

ASSETS & INVESTMENTS

LEARN from BATMAN!

f Bruce Wayne–aka Batman – was walking among us, he would be the 73rd richest man in the world, boasting an estimated net worth of around $11.6bn.

Batman’s considerable wealth was built up over a number of generations. The first generation of Wayne’s handed over their merchant house to the second which, by the 19thC, had become a formidable corporate company. Now, in the 21stC, under the watchful eye of Batman and following an excellent diversification strategy, it continues to achieve success in the financial sector and high-end technologies. Back in the real world, the 2016 Wealth Report says two thirds of wealthy respondents were concerned about handing their wealth to the next generation as they didn’t believe their children would be able to build on that wealth. And two thirds of the next generation were not inspired to join the family business because they were not excited by the business. They believed the business should be expanded, modernised or reinvented to make it more relevant and sustainable for the future. There is no reason your family shouldn’t succeed in transferring wealth and success between generations. This level of success doesn’t take superhuman strength – it takes intelligence, courage and smarts. We can learn some lessons from the achievements of the Batman clan. Lesson 1: Diversify. What Wayne Enterprises did right, it seems, is to ensure that its business interests withstood the challenges of change

By Neo Kgantsi Portfolio Manager Sanlam Private Wealth NeoKg@privatewealth.sanlam.co.za @SanlamPW by evolving and remaining relevant. Its success lies in trust and in the transferring of trust and power from generation to generation. Your business may currently be booming and meeting the needs of your market, but if you are looking to retire soon and leave the business in the hands of the next generation, are you thinking ahead? If you are not diversifying and allowing fresh blood to evolve and introduce new ideas, your business may become stale. Would we even have heard of Batman if the Wayne’s had remained in hunting? Lesson 2: Collaborate. Wayne Enterprises includes more than 40 diverse umbrella companies that are well integrated in order to ensure the growth of the enterprise. It is vital that the various business units within a family ‘empire’ have some commonality – a shared mission statement for instance – so that they are not working as disjointed entities but rather collaborating for the greater good. Each business should have stated objectives that are measurable and the objectives for the each unit should be complementary. Lesson 3: Trust. Bruce Wayne relies heavily on his closest ally, Lucius Fox. He is perceptive, and an experienced businessman, entrepreneur and inventor, and is the mastermind behind returning Wayne Enterprises to its former glory. As a businessman, you cannot do it all –you need to allow experts to guide you and take control of areas they specialise in. To keep the family business growing, expose the next generation to your business model, teach them everything you know and don’t be afraid of the possibility of evolution. Many wealth creators are reluctant to talk to their children about their wealth and their plans to transfer their wealth, since they fear their children will become dependent or averse to work. This should not be the case. The sooner the next generation learns about money and the principles of savings and investments, the sooner they will be able to preserve and grow that wealth for future generations. Parents ought to take their children into their confidence, and speak honestly and openly. Wealth preservation is the best education a parent can pass on. n

ASSETS & INVESTMENTS

BusinessBrief

June/July 2016

Benefits of venture CAPITAL In a drive to increase long-term investment in both private and junior mining businesses, SARS has allowed for a deduction for investment in qualifying venture capital companies under Section 12J of the Incomes Tax Act.

he effect of Section 12J is that it creates an opportunity through which a pool of financiers’ funds can be used to invest in private and junior mining businesses. This would facilitate growth in these sectors and create a potential source of scarce start-up funding. How does it all work? To qualify as an investor, one merely needs to be a tax payer with one’s tax affairs in order. To qualify as a venture capital company, the business must be SA-based with the sole objective being the management of investments in qualifying companies. The business must have its tax affairs in order and must be licensed in terms of section 7 of the FAIS Act. Once a business has been approved as a venture capital company, it needs to satisfy the following criteria at the end of each year of assessment:

•A t least 80% of the expenditure incurred by the venture capital company must be to acquire qualifying shares in qualifying companies, with each qualifying company not have a book value exceeding certain limits – R500 million for junior mining companies and R50 million for other private companies; and •N ot more than 20% of the capital raised by the venture capital company can be used for acquiring shares in any single qualifying venture capital company. How investors can benefit The benefit for the investor is that taxpayers are allowed a 100% deduction in the amount spent on the subscription for shares in a venture capital company. There is no annual limit or lifetime limit on the total amount of the deduction. The effect of the deduction is that the net cost of investment will reduce by the effective tax rate affecting the person while the value of the investment remains the same. This is an immediate

increase in the return for the investor. There is also no recoupment of the deduction, provided that the venture capital company shares are held for a period of no less than five years. This deters speculators and encourages long-term investing which is much needed.

By Zane Schalkwyk Corporate Finance Associate Sasfin Corporate Finance Zane.schalkwyk@sasfin.com @SasfinBank

Not without challenges One of the minor drawbacks of new legislation is that it is still under assessment and will only be available until 30 June 2021, at which time the scheme will be reassessed and its merits evaluated.

Another drawback is that it is only applicable for the subscription of new shares, meaning any “secondhand shares” acquired by investors will not attract the same deduction. The new legislation will also not be applicable to debt or hybrid instruments. n

The benefit for the investor is that taxpayers are allowed a 100% deduction in the amount spent on the subscription for shares in a venture capital company

BusinessBrief

June/July 2016

ASSETS & INVESTMENTS

M&A opportunities available! Commodity exposure and the global economy’s risk-aversion has resulted in a decrease in appetite for emerging market assets in recent months.

or much of Africa, the current drought is another unexpected dampener of global acquisition appetite with a number of prospective deals falling through or being significantly downscaled as the long-term economic impact of the lingering drought becomes increasingly more apparent. As a result of these economic challenges, the South African equity market, and many African markets as well, have experienced a steady decline in prices of many listed stocks. In addition to this, a number of SA companies (both listed and unlisted), are finding themselves in a position of distress and are consequently desperately looking for ways to bolster their balance sheets with capital injections from new strategic equity partners. For acquirers - whether local or international - with strong balance sheets and arguably even stronger constitutions, this situation presents a fairly compelling opportunity. Activity in the South African M&A market Notwithstanding the weak macro and local economic environment, there remains a fair amount of activity within the South African M&A market. There still appears to be appetite from offshore funders to fund deals in SA largely as a result of the deterioration in the Rand and South Africa’s continued perception as the “gateway” to the continent. This may result in local stakeholders assuming a level of confidence that is being inflated by global acquirers with the financial means to back their long-term bets on what are, right now, clearly undervalued SA companies. Opportunities in current economic environment Aside from the possibly artificially inflated confidence levels, the truth is that while many potential South African acquirers may have been spooked by the less than optimum economic environment in the country at present, for those who are willing and able to take a long-term view, the suppressed local markets actually present some real opportunities. Despite

funding lines from banks becoming fairly hard to come by, many of these distressed businesses present a compelling acquisition proposition for those acquirers brave enough to look past the current environmental challenges and see the fundamental strengths that underpin many of these businesses - and the prospects they offer to have a stake in a high-quality asset operating in South African and African sectors that could well outperform in a few years’ time. Over and above lower local valuations and the numerous distressed assets, diversification is another key consideration for acquirers who may currently feel the reluctance to invest due to economic and market challenges being experienced on the continent. At face value, organisations in distress may appear to be unwise acquisition targets, however, in many instances they include underlying businesses or assets that are fundamentally excellent and offer the opportunity to diversify. This obviously presents forward-thinking acquirers with a unique opportunity to diversify their own business interests, which in turn makes their organisation that much more resilient, and valuable over time. While the combination of lower valuations and the need for diversification may drive M&A activity in SA, the case for acquisitions in many other parts of Africa is not so clear cut. Given the continent’s continued rise as a globally appealing investment destination, Africa undoubtedly presents savvy acquirers and investors with many opportunities. Short-term volatility and instability aside, there are many investors that clearly recognise the opportunities to be had across Africa. South African companies and investors with the means and willingness to take a long-term view would certainly be well advised to do the same. n

By Shabbir Norath Head: Advisory: Nedbank Corporate and Investment Banking CIB@Nedbank.co.za @Nedbank

ASSETS & INVESTMENTS

BusinessBrief

June/July 2016

HEDGE FUNDS suffer!

ollowing a strong 2015, when long/short equity hedge funds posted returns north of 20% relative to the local equity market, which returned 5% for the year, hedge funds were off to a rough start in 2016, as negative sentiment surrounding global equity markets continued. This was, however not unique to hedge funds as markets across the globe, with the exception of fixed income markets, were not spared. Compounding the problem of weak growth on the local front was the decision by the Reserve Bank to hike interest rates aggressively by 0.5% to 6.75%. Ironically, the big bounce back for the year to date came from Resources, which posted a solid 12% return in February, while Financials and Industrials

remained in the negative territory. The jury is still out on whether the Resources rally is sustainable or purely driven by short-term market movements, as most of the Resource stocks and global economic fundamentals are not supportive of this upward price momentum. While hedge fund strategies remain underwater year to date, the positive momentum seen in March is expected to continue as most managers have covered the short positions that were the biggest detractors to performance. On the other hand, the return profile for investors that invest through optimally constructed fund of hedge fund portfolios is expected to be smoother, as these diversified portfolios minimise single-manager and single-strategy risk. Absolute return-type investments, like

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hedge funds, should continue to play a big part in portfolio construction as the current period of increased volatility and uncertainty is likely to linger for longer. Unlike traditional investments, hedge funds are not limited to either a rising or falling market to generate positive returns. Until markets go back to fundamentals and are no longer driven by short-term market movements, hedge fund managers with diversified portfolios, which consist of small position sizes, will be better placed to navigate the current market environment. n

By Nosibusiso Ngqondoyi Head of Research Novare Investments busi@novare.com

BusinessBrief

June/July 2016

BANKING & INSURANCE

CASH, trade & securities connect

he message that it was time to get back to basics resonated in the industry and it meant sound transactional banking principles like the management of payments, receivables, reconciliation and trade risk instruments found their place on the corporate clients business agenda. This shift in focus meant that clientsâ&#x20AC;&#x2122; expectations from transactional banks also increased and this in turn engendered competition in the market for better product offerings. Access to information The visibility of information became critical and clients wanted real time access to their global cash positions in order to manage their working capital requirements and liquidity carefully. Clients wanted the ability to manage risk in their business through the use of international trade products. Banks desired more annuity-based revenue with lower capital costs and less capital consumption. Regulators drafted a raft of compliance and regulatory changes in a bid to clean up the financial sector and bring about more stability. Banks have had to make significant investments in both technology and operations to align to the move towards centralisation of treasury functions and the need to deliver integrated standardised end-to-end solutions. Tech changes everything An additional force that is disrupting the industry is some of the major technological innovations that are also coming to the fore, many of these being provided by non-banks in the form of â&#x20AC;&#x153;Fin Techâ&#x20AC;? companies. Physical cash is still considered king in most parts of Africa, however, with the rise of technology solutions such as Mobile Money coupled with regulatory moves in some markets towards moving cash into electronic forms, this will be a key area in which banks need to very carefully manage their response, whether it is competing head on, partnering or simply monitoring developments. Industry

By Hasan Khan Head: Transactional Products & Services Standard Bank Hasan.Khan@standardbank.co.za @standardbankza forums are driving standardisation of client interactions with their banks and how regions clear payments in real time across borders. Africa was, until recently, one of the fastest growing regions in the world. It benefitted from a rapidly expanding and resource-hungry Chinese economy. The high commodity prices, low interest rates in the West and an appetite to invest in emerging markets that underpinned much of the growth are beginning to reverse. Lack of liquidity The plunge in internationally traded Brent crude, from USD115 a barrel in June 2014 to below USD30 in January 2015, has coincided with a number of factors weakening the gains made by certain regions in the African continent. Declining commodity prices and a lack of liquidity have placed pressure on trade flows in many African countries and regions. Challenges such as the lack of infrastructure, access to power still exist, however, with this comes opportunity. The facilitation of intraAfrican trade will help boost economic growth and assist in alleviating some of these continental challenges. There are still exceptional growth stories, especially in non-resource sectors. In fact, Africa is expected to be the second fastest growing continent within 10 years, behind emerging Asia but ahead of the Middle East, with more than 50% of countries growing in excess of 5% annually until 2025. As this growth takes shape, clients will increasingly look to their bank to deliver specialist solutions for African conditions to manage associated risks through the right level of product capability across cash, trade, custody and securities. Winning a client relationship in Africa and delivering on the commitments made earns a bank a flow business that grows as the client grows; this is why getting it right in Africa for corporate clients is crucial. This essentially means becoming a trusted advisory partner. Placing clients at the centre of what banks do must be the number one priority as the above trends unfold. n

BANKING & INSURANCE

BusinessBrief

June/July 2016

Trustee apathy takes TOLL!

consultants and actively review their portfolios, it could lead to a fund not being structured in the most optimal way for the beneficiaries.

Speaking to trustees of retirement funds, it is concerning that many of them do not proactively and regularly address investment challenges, but instead just rely on consultants to advise them on asset and geographical allocation in retirement funds.

This apathy among trustees is not just a South African phenomenon. A recent study among trustees in the UK, sponsored by SEI’s UK Institutional business, found that approximately 42% of those surveyed never challenged the advice of their investment consultants. This may have led to an increased burden on employers. In the last five years, 41% of schemes have increased employer contributions as a result of underperforming against their benchmark. The average increase was 22%.

etirement fund trustees have a fiduciary duty to protect and grow the future assets of their fund members. However, apathy on the part of trustees may lead to decisions being taken that are not in the ultimate best interests of the fund members.

Safeguarding assets Trustees have a fiduciary duty to safeguard the assets entrusted to their care. Consultants certainly play a valuable advisory role, but the final responsibility still lies with the trustee. This is incredibly important, as trustees are ultimately a guardian of the members’ future savings. This responsibility cannot be offloaded to outsiders who have no accountability to the fund members. This duty requires trustees to be proactive in addressing investment issues that can have an impact on their respective funds, rather than wait for a consultant to bring it to the agenda. If they do not regularly question

The traditional investment consulting model, on which many retirement funds operate, may also make it difficult for funds to adequately monitor the services their consultants provide. The research clearly underlines this point, revealing that 59% of the trustees surveyed do not frequently consider alternatives to the advice proposed by their investment consultant. One of the reasons behind this is that investment consultants operate in a traditional environment that is not resultsbased. Accountable advisory model It is not only the fault of trustees that this reluctance to question advice exists. The present consultant model does not allow trustees to be constantly aware of the funding position of their scheme. Without this knowledge it is difficult for trustees to not only monitor, but also challenge, their advisors. It seems clear that a more accountable advisory model is needed where fees are based on results and the trustee board is able to clearly track the funding level against the fund’s goals. Over the years, one of the areas that has often been neglected in portfolio construction, is offshore allocation. Some trustees cannot remember the last time they undertook a full, in-depth review of their offshore assets. The effect of non-optimal asset and geographical allocation is especially amplified over a long period, such as with retirement funds with an investment horizon of 20 to 30 years.

By Giles Mokoka Managing Director SEI’s Institutional Group South Africa GMokoka@seic.com @SEIAdvisors

The decision to take money offshore should not just be done on the basis of currency movements at a certain time, but rather viewed as a crucial strategic geographical allocation thanks to the long-term diversification benefits of offshore assets. n

BusinessBrief

June/July 2016

BANKING & INSURANCE

ARE WE OVER-regulated? SA’s business community is being stifled by over-regulation. Nowhere is this more evident than in the financial services industry where financial advisers and insurance brokers find themselves under a barrage of increased scrutiny by the regulatory authorities.

s the law stands, before an adviser can begin to give advice on complex insurance and investment products they must comply with a number of regulations and accompanying codes. These include the FAIS Act and its General Code of Conduct and Conflict of Interest regulations; Binder regulations; Outsource agreements and the principles-based Treating Customers Fairly initiative to name a few. Those who still ply their trade in this competitive industry must forever balance rising operating and compliance costs on the one side with a declining (regulated) income stream on the other. The irony is that by raising compliance costs the regulators are achieving the exact opposite of their pro-consumer mandate – their regulations are contributing to a decline in adviser numbers. Despite an already expansive regulatory landscape the Financial Services Board (FSB) is pushing for another major intervention, known as the Retail Distribution Review (RDR). The original RDR document released in November 2014 contained 55 proposals, a few of which are necessary and in line with the previous incremental approach to regulatory change. The Board of the FIA understands the need for a rewrite of current legislation to accommodate the “Twin Peaks” regulatory structure and is also cognisant of the need to address certain market conduct activities that result in poor outcomes for consumers. The immediate concern centres on the extent and pace of the implementation of the Phase 1 RDR proposals. The intermediated industry is deeply concerned about certain comments in the RDR that paint all advisers with the same brush as those few individuals who may have broken the rules, bringing the honesty and integrity of the entire industry into question. Publically available information supports that the number of “poor customer outcomes” are miniscule in relation to the volume of advice given and claims

By Justus van Pletzen CEO Financial Intermediaries Association of Southern Africa (FIA) justus@fia.org.za @fia_org_za paid. More specifically our concerns include the staged approach to the RDR implementation; the inclusion of unrelated practices in what was meant to be a “retail distribution” review – something called regulatory creep; and the ongoing erosion of the service offered to consumers coupled with the erosion of the adviser’s right to earn an income from providing such services. A critical oversight in the current process is the perceived failure to rely on empirical and independently verified data with regards the value added by advisers in the current environment as well as the impact of the proposed regulatory interventions on the level of service offered to consumers, level of adviser remuneration, employment in the financial services sector and a range of other macroeconomic factors. In addition to providing professional advice on financial products today’s brokers and advisers perform many specialised business functions on behalf of product suppliers, for consumers. The consumer stands to lose these benefits if the current advice model becomes untenable. The regulator’s proposed “extensive remodel” of the intermediated distribution environment should only proceed following thorough studies which can better inform the regulatory direction as well as be used as benchmarks to assess post-reform outcomes. In the absence of such benchmarks, there is no way to conclusively prove the positive or negative outcome of the regulatory intervention. All facts considered, we strongly suggest that the regulator pause the RDR process at this critical juncture, because to forge ahead with so many unknowns could lead to unintended consequences for consumers, the financial services industry and the economy. n

PROTECTION from negligence ?

tatistics reveal that in the UK three quarters of business owners fear making professional mistakes, yet the majority remain both unprepared and unprotected to attend to a compensation claim should it arise. Many South African professionals do not have Professional Indemnity insurance in place, which can be equivalent to running a business on a knife’s edge. A professional’s work is constantly in the spotlight. Regardless of how careful you are, clients are becoming increasingly aware of their rights to hold a professional responsible for any damages or loss that they may incur. Professional Indemnity is no longer a luxury but a necessity, and allows professionals to concentrate on their business’ operations with the knowledge that they are protected should a client claim for compensation due to the quality of their service or advice. Any professional providing professional services involving specialised knowledge or expertise – including advice, design, consultancy, opinion, or analysis services – requires Professional Indemnity. Whether a doctor, lawyer or engineer - reputation is critical to the success of the business and individual as the business transaction is founded entirely on trust. The business’ longevity is based on the professional’s ability to provide a robust product and reliable service.

By Gillian Wolman Head of Litigations Risk Benefit Solutions (RBS) gillian@rbs.co.za @RBS_Insurance

Without Professional Indemnity insurance, professionals could face hefty amounts of legal expenses and compensation damages which could potentially cripple most small to medium sized businesses. This is not to mention the loss of income due to the time spent defending the allegation, which could also ultimately cripple a firm. When investigating Professional Indemnity insurance options there are a few circumstances to note: he specialty of the cover should •T equate to the degree of expertise that the professional works in. • When choosing an insurer, price should not be the only metric, as low prices often have a costly alternative outcome. Furthermore, make sure that the insurer has a reputable track record and is likely to remain in operation for many years to come. Should that company go bankrupt, the personal indemnity cover will lapse, leaving a professional extremely exposed. • Should the need arise to change insurers, it is highly unlikely that the new insurer will cover the professional for any existing claim, and any current claims prior to the insurer placing cover will need to be declared. The insurer will not process a claim if the client is found in breach of this clause. • P rofessional Indemnity cover lapses as soon as the policy is cancelled. Even if the claim applies to when the policy was in place i.e. the error was made six months prior to the policy’s cancellation, the professional still will not be covered. It is for this reason why so many professionals continue to pay for the policies when changing careers or even after retirement. n

Risk and Insurance Brokers who Empower Results In today’s ever-changing environment, successful businesses take the advice of a qualified, expert Insurance Broker who is on their side. Partner with Aon to Empower Results for your business and employees. Call 0860 453 672 or visit www.aon.co.za today.

Aon South Africa (Pty) Ltd is an Authorised Financial Services Provider (FSP #20555).

Risk. Reinsurance. Human Resources.

BusinessBrief

MARKETING & SELLING

June/July 2016

EMBRACE a YOUNG, digital world!

he “always-on” digital tendencies of the youth in the Generation Z and Millennial groups consistently manage to attract attention and criticism from older generations. In a recent White Paper, A Youth Lost in Translation, which is based on the findings of HDI Youth Marketeers’ research, we explore the views of 5400 urban and periurban youth and uncover both the positive and negative consequences that arise from the digital behaviour of SA’s youth.

By David Blyth CEO Yellowwood davidb@ywood.co.za @askyellowwood

work. The youth feel that instant messaging is better than face-to-face interaction and phone conversations. Mobile has overtaken fixed internet access, with 66,8% of survey respondents using their phones to access the internet most of the time. They are data-driven consumers, with most (62,1%) preferring data bundles to airtime. However, the constant flow of information is not without its anxieties, as there is little parents can do to prevent their youngsters from seeing disturbing content, or subject matter that they may not be mature enough to adequately process.

While parents may worry that the youth’s obsession with being digitally connected makes them anti-social and disconnected from “the real world”, Generation Z believe quite the opposite. Their connectedness actually enables them to have close relationships with people around the globe and keeps them well-informed on current affairs.

Generation Z are still children, and so the cognitive processing of all this information is still fundamentally a childish process. They are very naïve kids.

One of the significant findings in our report is that the average age of cellphone ownership has dropped from 11 to 13 in 2008, to six to nine in 2015. Of the kids surveyed (eight to 13 years old), 62,7% own a cellphone. These children said they spend most of their time online downloading and playing games.

The youth’s obsessive relationship with social media also contributes to their sense of anxiety, as they feel they have to constantly manage their online presence and image. Twitter never sleeps, Tumblr never sleeps, nor does Facebook. So, you have to make sure you are always up. If you don’t have at least 60 000 tweets on your account, you are not relevant.

Generation Z are children, and the cognitive processing of all this information is still fundamentally a childish process. They are very naïve...

Teens spend the most time instant messaging and 82,3% own a cellphone. More than 90% of young adults have a cellphone and spend far more time on social media than on research related to their studies or

If you had thoughts of working out how to prevent them seeing disturbing stuff, forget it, it’s too late. Rather be a part of the processing resource. Help them to understand what they are finding.

Social media is also a unique breeding ground for peer pressure, with some admitting that teenagers might feel pressure to bully others online so that they are seen as ‘being cool’. So while it contributes to social complexities, having a digitally-inclined youth also means that we have a multi-tasking, smart, savvy, social and globally-aware generation developing - which will certainly make for a brighter, albeit back-lit, future. n

Advocate customer experience Some of the most unforgiving customer experiences happen during the day-to-day interactions with a brand and are, more likely than not, a result of a poorer product or customer service experience. In fact, statistics show that 86% of customers quit doing business with a company because of a bad customer experience, up from 59% from 4 years ago.

esearch further indicates that 89% of customers began doing business with a competitor, following a poor customer experience. It is for this reason that customer experience – or CX as it is affectionately becoming known – should be a foundation pillar of any business. The reality is that today customers have a lot of choice, particularly with the internet which has broken down previous barriers to access, and customers are now actively turning to researching brands and products online and can source what they want from anywhere in the world. Consider for instance the pervasive uptake of social media, where these platforms have given customers the ability to influence other customers. Added to this, due to the disruptive nature of advertising in the past, consumers tend to trust other consumer opinions rather than Brand messages so word of mouth or customer advocacy have become really important. Fortunately, technology has made it easier for brands to collect data about their customers, either via explicit surveys using various channels such as email, Mobile, IVR, and web forms. Additionally, Social Customer Experience platforms have allowed businesses to ‘listen’ to what customers say about the brand and respond to customers on the social platform. Brands can access a wealth of valuable insights from all these sources to make it easier and more pleasant for customers to do business with them. However, managing the customer experience remains the foundation for success in any business, where more attention should be paid to the customer, their experience and what they have to say on their preferred channel, as this will continuously provide insight that can be used to refine and shape the customer experience. Those customer-centric businesses who manage to evolve by listening, acting and use technology to innovate the relationship will win the customer’s heart and achieve long-term success. n

By Yaron Assabi CEO Digital Solutions Group yaron@dsg.co.za @DSGLimited

Certified Professional Marketer (Africa)

BusinessBrief

June/July 2016

MARKETING & SELLING

GO DIGITAL for the RIGHT reasons

e all know that form follows function, or at least that it should (or, at least, we should know that it should). When implemented correctly, it’s almost impossible to notice that it’s happening; and, isn’t that the point? It’s the same with our bodies; if you begin to feel your back muscles stiffen while sitting, you’ll immediately know something’s up, and either you’ll get up or adjust your posture. Your body will helpfully yell for attention when it wants you to change something that’s not working. A business’s silos operate similarly. As a whole, they should seamlessly facilitate a handful of intelligible intentions. If each silo is attempting to achieve unrelated goals, then your business is striking a discord with your intentions. The discord, in turn, will be obvious to everyone; although, this is not to say that everyone will be able to articulate what they perceive to be wrong. This is what David Whyte means by communicating an uncomfortable and unspoken truth. Everyone knows there’s a problem but nobody knows how to symbolise it. The problem will remain unconscious until self-reflection occurs – an audit. In marketing, specifically, intentions inform the function. More often than not, if you see an activation, app or digital project of any sort that is as vapid as it is hightech, it’s because the intention was merely to grab attention. And, simply put, attention is the worst kind of intention, because it’s usually without meaningful and original content. What if the muscles in your back began aching, and no matter how much you moved around or adjusted your posture they just continued to ache because they’re aching for no reason. It’s the proverbial empty barrel. It has nothing real to say, but says it loudly nonetheless. What is so frustrating about this, is that it is actually a relatively simple problem to solve. All we need to do is ask ourselves two questions: “What do I want to achieve?” and “Why?” If there’s no intent behind using a particular piece of technology; if you’re building an app for

By Lee Blake Brand & Content Manager UNO Digital Lee@unodigital.co.za @UNO_Digital no other reason than your competitor built one; if you created a Facebook account, Twitter handle or WeChat profile without a strategy to feed it; if you built an expensive flashy website when all you needed was a Wordpress template, then all you have in your possession is an obese and very hungry white elephant. Your customer might enjoy the experience in the moment, but later they will struggle to relate it back to your business – in other words, a disconnect arises and something needs to change. Rather spend 80 per cent of your budget on the content and have a low-tech execution, than blow 100% on executing an empty strategy. Furthermore, we have to realise that new technology has implications beyond its original intention, moreover, these should be your business’s intentions. This is because technology is first and foremost a form – not a function. Counting is a function, but the calculator on your cellphone is a form. You need to have something for your technology to do – like solving a problem, otherwise your function is following your form. Lastly, we need to realise that realism is indeed a barrier. If you go digital, then do just that. When the camera was invented, artists began to move away from realism because they couldn’t compete with the new technology’s cost-effective means of capturing a likeness of reality. But, eventually, artists realised that they had something that the camera (a form of representation) didn’t, and used it to further disrupt the market. They began painting, drawing and sculpting things that the camera couldn’t – and our rich inner worlds of emotions, dreams, nightmares and perceptions were given a new voice, and with it a new and different form of content and expression was born. The point is, if you’re going to use digital and other technologies, then use them to give expression to a unique intention. The great thing is, if you’re in an established business, you already know your intention. You know what your client or consumer wants, how and when they want it. You know your story as well as theirs. Use technology as a more effective way to tell your stories, not to be your stories. n

MARKETING & SELLING

BusinessBrief

June/July 2016

Capturing THE RIGHT moment Think explicitly about interactions with customers in terms of journeys rather than focusing only on campaigns and products. Harness data to understand customers’ behaviour. Target consumers with the information they need in the micro-moment.

micro-moment occurs when a consumer wants to know something, go somewhere, do something, or buy something. In these moments, brands have an opportunity to influence consumers to act, but only if they give them the correct information or service.

By Bianca Quinn-Diavastos Head of Business Solutions & Strategy 25AM BiancaQ@25am.net @_25am

Connecting Israel te people... Connecting e l p o business people Connecti n g peopl e ... gnitcennoC Connecting Connecting The first obstacle a brand needs to clear on the customer’s journey is consideration – putting its offerings on the radar at the customer`s “I want to know” or “I want to go” moment. Organic and paid search has an important role to play here – it’s important to be visible at the moment a customer is looking for answers. Understand when and where customers are looking for information as well as what information they are looking for. The goal is to answer the customer’s immediate need rather than to hard-sell a product. Other crucial micro-moments are “I want to do” and “I want to buy” – moments that map to conversion in a typical customer journey. When the customer decides to make a purchase, it can be done from anywhere.

Use customer, location and device data to streamline the conversion process. Ensure that buying is as frictionless as possible. Though smartphones are central in micro-moments, they are not the only channel or device. Track and optimise customer behaviour across mobile and desktop sites, apps, phone calls and store visits.

Savvy marketers track customer behaviour beyond the purchase to ensure customers are happy and to support them on further purchase journeys with their brands. Although micro-moments are fleeting, they have the potential to ignite good customer relationships that can last for years. n

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BusinessBrief

June/July 2016

HUMAN CAPITAL

Women & youth accelerate growth! The remedy for our anaemic economy growth and social ills lies in more vigorous implementation of policies that promote greater economic participation of women and young people.

vidence from the International Monetary Fund, McKinsey Global Institute and the OECD confirm that greater participation of women in the economy is not only morally desirable, but also essential for sustainable prosperity of the global economy as well as for individual countries. StatsSA’s latest report focussing on the vulnerability of young people demonstrates once again how we are failing to take advantage of the “youth bulge” to develop a more skilled creative working population to drive our economy. Young people constitute close to 70% of the unemployed population. SA with its human rights constitutional foundations has all the recommended policies and legislative framework for greater participation of women and young people in socio-economic development. The OECD reported in mid-April 2016 that professional highly skilled women were emigrating from our shores to Canada, UK and Australia in search of better economic and personal security prospects. They cite lack of opportunities to develop their full potential and often hostile toxic male dominated environments. Women are 51.2% of the population yet only 46.8% of the employed population. Women constitute only 2.4% of CEOs, 9.2% of Chairpersons of Boards, 11.60%, JEC Directors of Companies 21.9 and 29% of Executive managers. The public sector does better at 38.2% of Management, 40.5% of SOEs top management and 58% of public service employees. The private sector has to rise to its leadership responsibilities as the creator of economic opportunities in all the major sectors of the economy. Vigorous implementation of the various agreed policies to transform our economy into

one that leverages all the talents of black people, women and young people needs to be a key focus. The private sector needs to partner more effectively with government at all levels to build greater trust and drive transformation. Greater attention to the institutional culture of companies is a key success factor in promoting inclusion. The private sector needs to be bolder in its leadership in scaling up the various successful initiatives to drive education and training of their own workforces as well as that of communities in which their businesses are located. The private sector in partnership with civil society needs to engage those public authorities that obstruct transformative interventions. We have one of the most elaborative highly funded skills development programmes, but many young people remain excluded from education and training. Young people including the #Feesmustfall Movement correctly demand accessible high quality education and training. We have the resources to meet this challenge if only we can work together to re-order our priorities and hold leaders both public and private accountable for driving greater inclusive development. Higher education institutions should be held more accountable for creating teaching and learning environments free of sexual, racial and other harassment that undermines talent development and more effective utilisation. Higher education’s role is to enable the emergence of well-rounded professionals with the requisite value system appropriate for our constitutional democracy. Greater inclusion and equality is good for all. SA has most of the policies to promote inclusive sustainable economic growth. What is needed is visible felt committed leadership. The business case has never been stronger for the private sector to step onto the bridge. n

By Mamphela Ramphele Active Citizen mamphela-ramphele.com rap@mamphela-ramphele.com @mamphelar

HUMAN CAPITAL

BusinessBrief

June/July 2016

YOUR career survival kit

By Mosima Selekisho Director Talent Africa mosimas@talent-africa.co.za @Talent_Africa

urvival of the fattest was sometimes seen during the world’s last economic crisis when banks that were “too big to fail” were bailed out. Survival of the fittest is more likely in the next downturn as businesses and state enterprises assure their future by doing more with less. How close are we to such a crisis and what can executives do to protect their careers? Recession may be closer than we think. SA is close to zero growth and many observers believe global crisis is imminent. They identify various triggers – a big Wall Street correction, austerity in Europe leading to social upheaval, negative interest rates taking markets into uncharted territory or a hard landing by the Chinese economy. The end of the commodities Super Cycle has already impacted resources and emerging markets. Anglo American alone is planning to axe 85 000 jobs. Meanwhile, to avoid sovereign debt rerating to junk status, our government is seeking public sector efficiencies and considering the amalgamation of departments (perhaps entire SOEs). Many managers are unprepared for tough times. The 2009 recession was short lived. Effects were most severe among youthful job seekers who found there were simply no vacancies. If another downturn comes it could last longer and managers with a career path stretching back five, 10 or 20 years could find they are in the firing line this time.

Clearly, perceptive managers must ask themselves “Why should the company keep us on?” Here are “items” that belong in any career survival kit: nergy: display a get-up-and-go attitude. Be prompt, be •E lively, be alert at every meeting and every interaction with peers and subordinates. • ROI: people generate ROI as well as departments. Don’t assume the firm’s investment in your training and career pathing protects you. Demonstrate a return by achieving KPIs and strategic goals. • Positive attitudes: Companies shed “thorns” in a downturn. Don’t be an irritant. Be enthusiastic. Don’t be a nay-sayer. Be a solution-provider. • Creativity: Be a source of new ideas. Don’t simply throw out ideas at a meeting, develop winning concepts, take ownership and make sure you are associated with successful initiatives. • Hard work: Talent alone won’t protect management jobs. Demonstrate value by working hard and smart, and displaying natural ability. • Ability to look ahead: Don’t await events, anticipate them. Savings and efficiencies will be focus areas. Don’t wait for top management to explain the obvious. Consider options, make estimates and make a start. Make sure your proactive approach is noticed in the right quarters. • Realism: Show you’re alert to new realities and the new normal. Show your eagerness to take on a new role. This may entail greater responsibility and more work as amalgamation and rightsizing take place. You may find the job grows, remuneration doesn’t. Stay positive. Reluctant acceptance strikes a sour note. Attributes like this may not guarantee your career survival, but they will identify you as a potential asset in challenging times. If we avoid recession, you’ve lost nothing. Qualities that are good for career survival are also good for career growth. n

bbrief.co.za is a portal where business decision makers can access business resources in South Africa that effect their decision making ...

BusinessBrief

June/July 2016

HUMAN CAPITAL

Employer’s right to lock out?

n 8 March 2016, in the case of Transport and Allied Workers Union of SA vs PUTCO Limited, the Constitutional Court pronounced that an employer may not impose an offensive lock-out in respect of members of a union who are not party to a bargaining council, in which a dispute has arisen and where other union members have embarked on a strike. The case dealt with the rights of an employer in terms of section 64(1) of the Labour Relations Act (LRA), which affords an employer the right to lock-out employees where there is a dispute of mutual interest between the parties. If the members of a union have not embarked on strike action and the employer elects to locks out its employees, this is termed an offensive lock-out. A lock-out in response to a strike which is being held in relation to an existing dispute is considered a defensive lock-out. The right to lock out has now been dealt with by the highest court in the land, and this judgement has settled two conflicting judgments handed down by the Labour Court and the Labour Appeal Court (LAC) on the same matter. Constitutional Court Decision The Constitutional Court disagreed with the conclusion of the LAC and, in upholding TAWUSA’s appeal, considered that if the purpose of a lock-out in terms of section 213 of the LRA is to compel employees to accept the employer’s demands, then an employer must make a demand to employees before locking them out. Section 213 of the LRA provides a definition for a lockout, stating that it constitutes the exclusion by an employer of employees, for the purpose of compelling the employees to accept a demand in respect of any matter of mutual interest between the parties. In this case, the PUTCO/TAWUSA recognition agreement required that negotiations in respect of wages and other conditions of employment be undertaken at the bargaining council; the Constitutional Court found that the consequence of this was that demands in respect of these issues could only be made at the bargaining council. Therefore, given that TAWUSA was not a member of the bargaining council, the Constitutional Court reasoned that no demand had been made to it. Further, TAWUSA was not in a position to accede to the demands that PUTCO had made to the trade unions that were members of the bargaining council. Accordingly, the lock-out of TAWUSA fell outside the scope of section 213 of the LRA and constituted an unlawful exclusion of the

By Bradley Workman-Davies Director Werksmans Attorneys bworkman@werksmans.com @Werksmans TAWUSA members from PUTCO’s workplaces. The argument made by PUTCO that the Minister of Labour (Minister) ordinarily extended collective agreements to non-parties in terms of section 32 of the LRA, and that accordingly, TAWUSA stood to benefit from the outcome of the negotiations around the collective agreement was dismissed on two grounds. Firstly, the Constitutional Court held that the Minister was only empowered to extend a collective agreement once it had been concluded. The collective agreement could only be concluded through the prescribed process, which included an attempt at conciliation and for which the purpose of the lock-out was to compel the trade union/s to accept the employer’s demands. Secondly, the extension of the collective agreement to non-parties was not a foregone conclusion as any such extension would be subject to a request by the bargaining council after a voting process and various exemptions could also be applicable in terms of section 32(3) of the LRA. Consequently, TAWUSA could not have be considered a party to the dispute merely because there was a possibility that the collective agreement could be extended to it. Effects of the Judgement The Constitutional Court’s judgment appears to have placed a significant limitation on the employer’s right to embark on an offensive lock-out. Employers will need to ensure that all trade unions and employees to whom it issues a lockout notice, are indeed party to the mutual interest dispute. Where there has been no demand, there can be no dispute and no lock-out. Merely having an interest in the outcome of a process, does not equate to a dispute. The most immediate consequence being that unless the employer can and has extended its demand to its entire workforce, the employer may be precluded from locking out its entire workforce. In the circumstances where not all the employees are on strike, the employer will be forced to run a portion of its operations for the workforce that is tendering its services. This may not be commercially practical or possible for the employer which in turn could ultimately curtail any benefit which may be gained by a lockout. n

HUMAN CAPITAL

BusinessBrief

June/July 2016

Ethics IN RECRUITMENT

nethical practices within the recruitment industry are unfortunately rife and can result in job-seekers being disappointed, demotivated and even exploited. In many cases, unethical behaviours are not illegal, but they do give the industry a bad reputation. Tell-tale signs of an unethical recruitment agency include those that share CV’s without the consent of candidates, “email jockeys” who do not interview candidates but rather just obtain and share information via email, and those who have not joined a reputable professional body which holds members to a code of good practice and ethical standards. Under no circumstances, should candidates pay for the services of a recruitment agency. The law forbids employment

organisations from charging job-seekers to secure them employment and this should never be the case when dealing with a reputable and compliant agency. Some essential factors for businesses to consider for ethical recruiting: ever place misleading job ads •N • Interview correctly to ensure proper matching • Treat all candidates equally • Solicit necessary information • Maintain confidentiality on the use and storage of candidate information • Never practice redirection • Inform candidates appropriately Candidates can also be unethical. For example, those that use agencies to obtain offers that they use as leverage in bargaining with their current

employers. Another example would be those who try to circumvent the agency by going directly to the client once they have found out who the client is. It is crucial that we are ethical in the recruitment process as we are facilitating life-changing decisions. People make big decisions based on job offers; for example, buying a house. Human capital is regarded as one of a company’s most valuable assets, and the correct placement of crucially important staff will impact directly on their bottom line. n

By KC Makhubele President Federation of African Professional Staffing Organisations (APSO) president@apso.co.za @APSOZA

A BUSINESS APPROACH TO RECRUITMENT Many recruiters can give me: Web based applications, electronic responses to my posted positions, and internet matching of candidates and positions

My recruiter: • Uses traditional head-hunting and recruitment skills • Visits my business and understand my requirements • Conducts definitive personal interactive interviews and reference checking • Has sound operational business experience and understanding of my business • Would definitely employ for themselves the people they send to me • Can interact with candidates on a business level to get the best information

Head-On Recruitment YOUR BUSINESS | YOUR CALL | YOUR CANDIDATES For your Recruitment Solution Contact:

Arlaine’ Kramer | Email: arlaine@head-on.co.za | Tel: 011 026 6000 | Cell: 082 884 1144

BusinessBrief

June/July 2016

INFORMATION TECHNOLOGY

Economy’s impact in ICT By Gerhard Malan Financial Director Rectron GerhardM@rectron.co.za @Rectron

A is in for a tough few years, if economists are to be believed. Our economy, weak rand and recent interest rate hike are affecting industries across the board – and ICT and ICT distribution are no exception. However, our economic situation also provides the opportunity for us to relook our business processes and find ways to better service our customers. Weak Rand results in expensive technology A snapshot of the ICT industry in SA currently shows that because the majority of products are imported, the weak rand has made technology more expensive. Since the start of the accelerated depreciation of the rand, resellers have reported that bigger capital outlays are being delayed for fear that the currency will further weaken. And while the demand for high end equipment is still there, it has decreased to give way to a larger demand for more affordable entryto mid-level equipment. Although most developed countries have not had to deal with rising interest rates, they have been dealing with a relatively flat economy, making distribution more competitive across the board. Every business trading its home currency against the US dollar has had to relook its approach to manage its foreign exchange risk.

outperform competitors who might be missing out on the change in how the market is spending. Of course, beyond these benefits, there is a very real need for businesses within the ICT industry to maintain cash flow. Keeping tight control over budgeted expenses and working capital should put a stop to overspending and uneconomical activities. At the same time, proper risk management when it comes to security, debtors, inventory, cash and insurance is vital. Businesses that are prudent in spend and organised in chaos will come out much stronger and grow much faster when the market turns. Finding solutions for the customer From the customer’s perspective, there are also ways to help mitigate risk and reduce capital outlay when the economy is weak. Resellers need to be assisting their customers to continue operating in difficult conditions by offering better advice and products that reduce their expenses or even increase their income. It’s clear that this is a model that’s working for many businesses, with the uptake of this service on the rise. Since the beginning of 2016 we have seen a trend towards deals being processed through rentals and asset finance rather than normal cash purchases. It’s an opportunity to opt for a manageable monthly expenditure over three to four years, as opposed to a significant once-off outflow of funds at the time of purchase.

That said, local vendors are doing what they can to keep their pricing as stable as possible, while foreign vendors are introducing some great initiatives to help protect us against our weakening currency.

What is important for resellers encouraging customers to adopt this model is to start the conversation early. This way, approval is sped up and the customer understands that a big capital outlay isn’t required. There’s also a need to educate on the difference between a rental and an asset finance deal, depending on the customer’s needs.

An opportunity to rethink how we do business Simultaneously, while everyone is experiencing the squeeze, it’s a great time for the ICT industry to correct our inefficiencies and cut unnecessary expenses. When the economy is strong, it’s easy to overlook these things, but now’s the time to place the emphasis on return on investment – every expense should be able to have a measureable return. It’s also an optimal time to

ICT is no longer a luxury but a necessity. That means that despite the challenges facing the ICT industry in light of the state of the economy, it’s never been more important to find new ways to keep technology accessible. There’s little doubt that we are in for a rough ride, but by thinking carefully about how we do business, we are in prime position to weather the storm and make it to the other side. n

INFORMATION TECHNOLOGY

BusinessBrief

June/July 2016

ELEMENTS of a homepage

he old saying “First impressions last” may be a cliché, but as with most clichés it really does ring true. In the digital age, first impressions are more important than ever as you literally have one chance - a few seconds - to impress and garner interest from whoever has just clicked on your homepage. Your homepage is like your shop window – the face of your business. When someone visits your homepage they are probably there because they need an answer to a question, a solution to a problem or reasons to choose you over your competitor – or all three! The question is: ‘Will they stay or will they go elsewhere?’ Consider these elements on your homepage that collectively can make a positive first impression and encourage someone to stay on your website – with a view to converting a visitor into a customer: Headline: The keywords here are: easily visible, clear and precise! By all means be creative with your headlines and subheading as long as your visitor is not confused - they should immediately be aware of what your business is about. Calls-to-Action: The primary objective of a “Call-toaction” is to encourage visitors to your site to be pro-active – whether it’s to read more about your products, order a service, speak to an agent, or simply view your product gallery. Taking action means that a visitor is one step closer to becoming a customer. Images: Good quality, high-res images will capture the attention of your visitors. The higher the quality, the higher the impact. Tip: try to refrain from using stock images that are not specific to your business.

By Jeremy Wilkinson Marketing Manager Webafrica jeremy.wilkinson@webafrica.com

Potential customers want to see what others think of you, your products and your customer service – let them. Easy Navigation: Your pages on your website should be clearly visible and easily accessible. Your Home, About, Services/Products and Contact pages should always be visible to visitors, especially on your homepage. Features: Just because the benefits sell better than the features doesn’t mean the features don’t have much value. Features are still an important factor to add to your homepage – potential customers want to see what exactly they’ll be paying for. Help Resource: The reality is that not every visitor will purchase from you after viewing your homepage. And that’s okay. But you can help them to make that decision in the near future by offering help: make additional information available that will assist them in solidifying their decision to do business with you. Recognition: Have you won an award, been nominated or voted as a favourite? Your visitors deserve to know! This creates a level of credibility that can only ever work in your favour in making an excellent first impression online. If you are unsure about how best to implement these elements into your homepage, speak to your web designer about incorporating them all on your homepage seamlessly, without making it look too cluttered. n

Benefits: Any content marketer will tell you that benefits sell better than features when marketing your products and services online. People want to know what they’re going to gain from doing business with you – so let them know right from the get-go, on your homepage. Social Media: Everything online is about being social and sharing. Make sure your company’s social media links are clearly visible on your homepage and, if possible, have a live feed display so everyone who visits your site can see what you’ve been getting up to, as it unfolds. Testimonials: Word of mouth is one of the earliest yet most successful ways in history to market your business.

Creating the strategy required to effectively operate online Tel: +27 11 782 0045 Q www.Strategyworx.co.za

BusinessBrief

June/July 2016

INFORMATION TECHNOLOGY

Cloud solves IT headaches to accurately meet the new requirements. • Remote, version independent support Getting support once took quite some time, particularly if the vendor had to first establish just which version and customisation package your ERP system was on. This seemingly simple information routinely took hours or even days to convey, depending on how hands-on the administrator is with your ERP package. With dated versions, configurations can be difficult to ascertain particularly if the operating system used by support staff is different to that used by the customer.

By Viesturs Zalaiskalns Channel Manager HansaWorld South Africa zalaiskalns@hansaworld.com

ompanies across South Africa and the world are discovering that cloud computing is a pretty neat way to procure the services necessary to do business. Cost consistently comes up as the primary advantage of cloud solutions – but they have many benefits beyond the price tag.

Not only do cloud services solve problems for businesspeople, they also address common gripes for those tasked with managing the IT department. When it comes to Enterprise Resource Planning in the cloud, it makes administrators’ lives (and those of users) a whole lot easier. Top headaches for which cloud ERP is a handy aspirin: • Automatic updates Ask any IT administrator how much they love updating applications. The chances are great that you’ll get a scowl and potentially a few choice words, too. With cloud computing, updates are continuous, happen in the background and typically require no intervention from staff or administrators. That happens with nearly all cloud applications. • System set up for new staff A growing business should be good news for all and not the nightmare for IT administrative staff it once was with old, on premise systems. Adding more users is easy with a cloud ERP solution – just sign them up, provide them with services required and away ahead they go. Business shrinking? If it does, your cloud ERP system can adjust and scale downwards

That’s out the window with modern cloud ERP systems: at the click of a button, the complete configuration information is made available to support personnel. The only limitation is the speed of the internet connection. • Automated resource warnings and allocation Server running out of memory? Additional hard drive space required? Processing power under pressure? These are the sorts of things which would once spark a crisis for administrative staff. It would also mean business interruption and lead to potentially large and unexpected costs. Cloud computing puts additional resources within reach on demand; automated alerts provide early warnings and resources can be ramped up or down depending on your requirements at any given time. You can even access, for example, high speed disk for several hours to address a spike in demand – and go back to regular disk once it’s passed. • No hassle, no cost access to new features In the old days, what you bought was what you got, end of story (or at least, until the end of the contract). On the one hand, that meant features which it turned out you didn’t need, were there, bought and paid for, regardless of use. On the other, it meant if you were keen to try out business intelligence, or CRM, or any other module, you’d need to be pretty sure about it, because once bought, it stayed bought. With cloud solutions, you get to try things out for free. You also get to change your licensing on the fly depending on what is and what isn’t adding value to your business. Cloud solutions are quickly becoming the de facto method of providing companies with the services they need to do business. More secure, more flexible and more affordable, it’s just a better way of doing things for these five and a great many more good reasons. n

INFORMATION TECHNOLOGY

BusinessBrief

June/July 2016

IoT: differentiator or THREAT?

f it is but one thing, the Internet of Things (IoT) is a business disruptor. It has pushed the boundaries of what everyday devices like fridges and watches are capable of, and has shown how it can solve problems in various industries, especially in the healthcare and industrial spaces. But amidst all the noise, have you found yourself wondering if the IoT is just hype? If it is just a passing trend in the ever-changing technology landscape? Well, it could be, except that it is actually changing the way that businesses do things in a permanent way, and is proving to be a platform that businesses can leverage to stand out from competitors. Take car and aero-engine manufacturer Rolls Royce for example. It has invested in jet engine sensors that not only produce realtime data but also report back on the condition of the engine and even maintain it remotely. Or John Deere, a company that manufactures equipment for the agricultural, construction and forestry industries that is using IoT and big data to monitor moisture in soil so that farmers can make more timely irrigation decisions. For farmers that means better yields, and always knowing when soil is at its best or if it needs irrigation which should in turn lower running costs and improve produce. These are just two markets that have chosen to embrace change and in fact, use IoT to their advantage by leveraging it to differentiate themselves from others in the same industry. So instead of looking at IoT as a nuisance come to alter your seemingly perfectly functioning

business, why not think out of the box and see why this technology is presenting itself as an opportunity? If you don’t, there’s a high probability that you will fall into the same failure trenches as those businesses that do evolve their products, services and offerings to meet the modern customers’ needs by incorporating new technologies (of which IoT is a part) will continue to thrive.

business and the markets you engage with. While there has been plenty of buzz around the IoT, the question you need to ask yourself, is why? If it was merely hype, it would have passed by now. In my opinion, IoT could be a threat or differentiator for your business, depending on whether or not you choose to embrace it and make use of the opportunities it can yield for your business. n

So how do you use the IoT to your advantage? You need to identify your business needs as well as your customer needs.

You need to learn to use the data produced by IoT to your advantage. If you can use this data which is already readily available...

As networks are bombarded with an explosion of previously unconnected devices and the data they now produce, you need to ensure that it’s business as usual and that the data being exchanged via your network is secure and more to the point usable. That said, you need to learn to use the data produced by IoT to your advantage. If you can use this data which is already readily available, to improve or create services do it.

Similarly, if you can use it to improve customer experiences go for it, this previously unfiltered data may even lead to a completely new product or business model, the bottom line is, it’s time to open your eyes and see the opportunities. The data provided from these modern connected devices could well be turned into information about your

By Louise Taute Comstor Director Westcon-Comstor Southern Africa Louise.Taute@comstor.com

BusinessBrief

June/July 2016

PROCESS & OPERATIONS

The power of CONNECTEDNESS Over the course of the last few years, an avalanche of transformational change has swept through all industries and society at large, forever changing the manner in which we communicate, collaborate, learn, play as well as engage with friends, family and colleagues.

mployees can now collaborate in teams composed of members from different nations as effectively as though they were in the same room, while billions of consumers generate an innumerable amount of data daily for marketers, advertisers, researchers and the like to analyse.

lighting that can transmit data to mobile devices. This is done through light, by way of embedded code. This means that building owners and facility managers can monitor and manage a buildingâ&#x20AC;&#x2122;s occupancy patterns, its lighting systems, as well as other important services simply by opting for intelligent lighting systems.

Lighting can also become part of a network, in which luminaires are uniquely identified and seamlessly integrated into the IT network within a building or even on a larger scale like a city, enabling these to share information about their status and operations.

By gathering information on how spaces are being used, managers can simplify business processes, optimise energy efficiency, and gain deep insight into customersâ&#x20AC;&#x2122; preferences and their tenantsâ&#x20AC;&#x2122; needs.

Embedded sensors allows each luminaire within the connected lighting system to act as a point of intelligence that can share information on changes in temperature or humidity, as well as activity patterns. More uses, less power usage Connected lighting systems allow for many exciting consumer usage cases such as tying in Philips Hue to your music in order for the bulbs to change colours to the tune of the beat, or more practical uses such as setting up Hue-connected lights to flash when the phone rings, enabling a deaf person to more easily know when someone is phoning them.

When individual users are connected through technology their ability to do more by utilising less resources is multiplied. When every light point is connected to an intelligent system that delivers high-quality, reliable illumination and acts like a pathway for information and services, the working space and connected lighting system within it is able to allow for even greater levels of performance by employees and teams. Connected lighting systems allow for the delivery of extraordinary value beyond illumination for companies, employees as well as managers of spaces. n

From a business perspective, companies can integrate wireless communications into the lighting system, allowing them to deliver location-based services and in-context information by way of mobile apps to people in illuminated spaces. Moreover, organisations can boost staff retention by making office spaces more comfortable for their employees. Office workers can personalise and adjust LED lighting to their preferences and tasks for instance via the connected lighting system, making harsh office lighting a problem of the past. For mobile access, office workers can even use a smartphone app to access other building services through a communications network. Future developments in the connected lighting pipeline include Ethernet-powered connected

by Reggie Nxumalo General manager, Philips Lighting,Southern Africa reggie.nxumalo@philips.com @PhilipsSAfrica

PROCESS & OPERATIONS

BusinessBrief

June/July 2016

Robotics DRIVES next generation

obotics and automation technologies present new opportunities for South African organisations to vitalise and even completely redefine their Business Process Services (BPS) functions. With robotics at the centre, organisations are able to scale faster, enter new markets or industries and become more fluid and responsive to customer needs. Robotics is driving what we could succinctly refer to as an evolution from “efficiency” to “effectiveness”. What does this mean? Firstly, robotics offers far greater value than just simplifying and automating what were previously manual processes. It sets the scene for cognitive analytics: where systems start detecting patterns, learning of their own accord and providing new insights into potential business opportunities. Secondly, it enables the smoother flow of operations in increasingly complex business ecosystems. By being able to tightly integrate internal business silos and external business partners, organisations enjoy the benefits of true collaboration. For example, by analysing buying trends and automatically sending data to suppliers or partners, firms can optimise their supply chains and distribution networks. Thirdly, by connecting with an organisation’s legacy systems, robotics can unearth hidden value from the data lying in this infrastructure. Tasks that were previously too complex as they required system integration, were time-consuming, or expensive for humans to perform, can now be performed at a fraction of the cost by the intelligent application of robotics.

By Rajesh Sehgal Global Head of Quality & Process Excellence Wipro BPS Wipro Technologies rajesh.sehgal@wipro.com @wipro

And finally, robotics-focused BPS allows firms to elevate parts of their workforce to higher-value roles. By detecting patterns and automatically plugging into workflow environments, BPS removes many of the lower-value operational activities from staff. Human capital resources can be devoted to higher-value strategic business management instead of operational efficiency. Bigger opportunities Taking a broader perspective, roboticsbased BPS promises to realise the vision of South Africa becoming a leading BPS outsourcing hub for the rest of the world.

Robotics offers far greater value than just simplifying and automating what were previously manual processes

Factors like local currency devaluation, strong Englishlanguage skills, similar time zones to Western Europe and good connectivity offer South Africa an excellent potential to become a net exporter of BPS skills and services. Whether we are discussing robotics within the organisation, or more broadly at a national level, now is the right time to seriously start considering the technology and how it can enhance the region’s companies, government departments and the economy at large. Robotics-based BPS will continue to evolve at rapid rates over the coming years and those that adopt the technology earlier will have a clear advantage over their peers. n

BusinessBrief

June/July 2016

PROCESS & OPERATIONS

Performance-based TRADE For any consumer goods manufacturer the topic of trade terms and trade investment is often an uncomfortable one. Over time trade terms have increased but the relative returns for the manufacturer have not been felt, therefore resulting in terms that don’t drive strategy.

n the past it was easier to justify keeping trade terms the same because there was almost guaranteed growth. However, today the pressure to change terms could mean the difference between surviving or folding. The big question on everyone’s lips is how to move from legacy-based trade terms to profit driving ones. Trade terms in the past were non-conditional and were not necessarily linked to driving business. Everything is about Return on Investment (ROI) and yet every year manufacturers feel short changed in their trade terms. Manufacturers need to be able to move trade terms from being an annual event that is dreaded, to a way of life every month and every day. This means tracking the effectiveness of their investment daily to ensure their strategy is enabled.

•B y ensuring there is strategic alignment between the trade terms and business strategy. Due to the historical nature of terms, they are often not aligned with the changing needs of the manufacturer’s business. Manufacturers need to find a way to fuel growth through an efficient trade investment strategy and then restructuring terms to reflect their business drivers. This means ensuring their investment gives greater volume or revenue growth and optimising their ROI. •B y making sure processes and systems are in place to track and manage the effectiveness of terms regularly. They don’t need ultra-sophisticated IT to do this, an excel document could be just as effective. The key is to link sales data into volume and revenue data and setup systems so junior managers are able to do it. If tracking is done then it is about managing efficiencies and optimising trade terms which can move companies to performancebased or conditional terms – even of the base terms. If this is managed correctly benchmarking across categories is far easier. • t rading terms are in the profitability analysis. This includes examining what the new product will do to the rest of the business and asking whether that is a good thing from a trade term perspective.

Manufacturers need to be able to move trade terms from being an annual event that is dreaded, to a way of life

It is critical to know what this trade investment looks like in declining categories or where disposable income is declining. If they can’t track their ROI, they will be at the mercy of the trader when negotiating terms. Today the real issue is about moving towards a performance-based trade investment and here’s how:

•B y reviewing the total basket of trade terms. What was relevant in the past and the component of terms has not really evolved. What has happened is that elements have been added but not reviewed. A full review which takes account of the entire picture is needed and this includes examining multiple categories and multiple trade structures.

By Sane Mdlalose Associate consultant Aperio sane@aperio.co.za @AperioFMCG

By focusing on the above, manufacturers are better able to manage an evolving trade structure so that trade terms remain relevant, effective and competitive for their business. Other benefits include being better positioned to understand category drivers, positioning and brand strategy as well as having cross functional working which means budget discussions are now more holistic. When manufacturers do it right, it will normally be the right strategy for the retailer too and their credibility should increase. While the trade terms discussion is a difficult one, if it is backed up by insights and analysis it should drive growth for both parties. n

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SEMINARS & CONFERENCES

CONTACT

BusinessBrief

June/July 2016

DESCRIPTION

Skills Development Facilitators Summit 2016 13 – 14 June 2016

Protea Hotel, OR Tambo Airport +27 (0)11 433 0952 info@mgip.co.za www.mgip.co.za

An SDF analyses skills, coordinates the Personal Development Plans and monitors the implementation of the Workplace Skills Plan and reports.

United Nations Procurement Summit 13 – 14 June 2016

CSIR International Convention Centre (ICC), Pretoria +27 (0)11 467 3341 sizwe@creativespacemedia.co.za

Engage and potentially partner with the UN and other local and international organisations.

Customs Back to Basics Workshop 14 June 2016

Johannesburg dsot@deloitte.co.za

Focus on managing the customs supply chain, the customs duty triggers, ways to reduce duty, principal-agent and Customs Administration relations.

CGF Global Summit 15 – 17 June 2016

Cape Town International Convention Centre +33 (0)14 133 6369 tcgfsummit@theconsumergoodsforum.com www.tcgfsummit.com

Delegates to explore theme of “Seizing opportunities in the face of disruption”.

SAICA Certificate in IFRS 15, 22, 29 June 2016

Sinosteel Plaza, Johannesburg +27 (0)86 107 2422 paulettew@saica.co.za www.saica.co.za

For auditors and users of IFRS financial statements.

2016 SME technical members 20 – 21 June 2016

PH Stellenbosch, Stellenbosch +27 (0)86 107 2422 paulettew@saica.co.za www.saica.co.za

Seminar: #1 challenge: keeping up-todate with legislation and regulation.

The Big Deal with Big Data 21 June 2016

Sunnyside Park Hotel, Parktown, Johannesburg +27 (0)11 880 9749 lizzy@qualitylife.co.za

How to take advantage of the real-time nature of big data and the opportunities it offers for business.

5 For Change Charitable Ball 2 July 2016

City Hall, Cape Town info@5forchange.co.za www.5ForChange.co.za

The evening consists of raising awareness and funds for the 5 selected 2016 beneficiaries.

Measurement and Evaluation Workshop 5 July 2016

Durbanville Hills, Cape Town +27 (0)11 326 1262 info@prisa.co.za

PRISA’s one-day workshop to equip yourself with the tools that you require to measure performance.

Hedge Fund 101 Masterclass 7 – 8 July 2016

Hedge Fund Academy, Parkmore +27 (0)11 783 9390 marketing@hedgefundacademy.co.za

2 day workshop to understand the new regulatory landscape and what it would take to remain compliant.

26th Annual Juliet Cullinan Standard Bank Wine Festival 12 – 13 July 2016

Summer Place, Hyde Park +27 (0)74 359 7995 events@julietcullinan.co.za

50 celebrated producers showcase their best vintages at the most exclusive, longest running wine event.

Maintenance & Asset Management Planning 13 – 15 July 2016

Birchwood Hotel, Johannesburg +27 (0)11 025 1252 emmanuel@thehillinstitute.com

Learn principles of effective maintenance planning, as well as techniques for developing an effective maintenance plan.

Labour Relations Summit 2016 19 – 20 July 2016

Protea Hotel, OR Tambo Airport, Johannesburg +27 (0)11 433 0952 info@mgip.co.za or www.mgip.co.za

Latest trends and topical issues in the labour market. Participate in formulating strategies to resolve some of the current employment challenges.

Compliance Institute Southern Africa’s 17th Annual Conference 17 – 18 August 2016

Indaba Hotel, Fourways, Johannesburg kashiri@compliancesa.com www. compliancesa.com

A culture of compliance protects your company’s reputation. Develop your knowledge at the Compliance Institute’s Annual Conference.

BusinessBrief

June/July 2016

CONTRIBUTORS

As a service to our readers, we have listed this issueâ&#x20AC;&#x2122;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

Centre for Development and Enterprise (CDE) KPMG Africa Desk UNISA SBL

MANAGEMENT

Baker & McKenzie Grant Thornton Innate Motion Nasedi Media & Communications South African Reward Association (SARA)

+27 (0)11 482 5140 +27 (0)11 647 7111 +27 (0)11 652 0000

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Business Partners Institute of People Development (IPD) Investec South African Student Solidarity Foundation for Education (SASSFE) USB-ED

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LEGAL

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TAX

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FINANCE & EQUITY

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(0)84 (0)11 (0)10 (0)11

920 806 590 647

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ASSETS & INVESTMENTS

Nedbank Novare Sanlam Sasfin

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(0)11 (0)11 (0)21 (0)11

294 447 947 809

4444 9605 9111 7500

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BANKING & INSURANCE

FIA RBS SEI Standard Bank

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(0)12 (0)86 (0)11 (0)86

665 007 994 012

0085 2765 4200 3000

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MARKETING & SELLING

25AM Digital Solutions Group UNO Digital Yellowwood

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HUMAN CAPITAL

APSO Mamphele Ramphele Talent Africa Werksmans

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(0)21 (0)11 (0)86 (0)11

833 203 000 848

1700 1000 9500 9000

hansaworld.com rectron.co.za webafrica.co.za za.comstor.com

EDUCATION & TRAINING

PROCESS & OPERATIONS

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(0)11 (0)11 (0)31 (0)11 (0)11

+27 +27 +27 +27

669 562 570 286 535

(0)11 (0)11 (0)11 (0)11

9000 1000 5300 6900 8000

367 266 471 061

4951 5111 5000 6500

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TAX HAVENS! P

IT TOOK EIGHT DENTISTS TO CHANGE THE FACE OF THE PROFESSIONAL INSURANCE WORLD.

1941. War is tearing the world apart. Eight South African dentists realise that the risk of incapacity – and therefore the loss of their livelihood – is severe.

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June/July 2016

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