WealthWise magazine
www.wealthwisemag.com
Vol I/No. 10
FREE
South Africa/Africa region December/January 2012
EXTREME MONEY
Risk, shock, devastating truths in the world of high finance
Your bi-monthly guide to wealth wishes you Happy Holidays!
Contents
December/January 201 2
Coverstory 8 Extreme Money
LifeWise
24 Have investors CareerWise capitulated against value? 47 The Team-Building 28 How to value equities Debate on JSE 51 The Missing Link
1 5 The No New Gifts BusinessWise Holiday Challenge 32 Attuned Leadership 1 9 Advertorial 40 The GAP Marketing Turnover Boost Model MoneyWise Part I 21 How to avoid the 44 What is Due credit card meltdown Diligence?
Agenda
53 Holiday Guide to Scenic Garden Route 60 Books 64 Events
Regulars: 3 Contents 4 ForeWord 5 Get in touch 6 Contributors 49 Competition 66 Last Word 67 In next edition
WealthWise magazine 3
ForeWord
Happy Holidays!
H
appy holidays! The “silly season” is finally around the corner and we are slowly starting to shift our focus from work and business to fun holidays, parties and carefree days in the African sun. Unfortunately, most of us adopt the same carefree attitude towards money and spending during holidays. This year, before going shopping or planning your breakaway, rethink your options and save your wallet by reading our good advice in “How to avoid the holiday credit card meltdown” and “The No New Gifts Holiday Challenge” – you’ll find it both entertaining and practical. If you’re still busy planning a holidaytriporasocialcalendar 4 WealthWise magazine
for the end of the year, you might want to read our holiday guide to Garden Route, a South African hot destination of choice and browse our events section.Alsodon’toverlookthe book review section for fabulous reads that make perfect gifts for your family and friends. Thiseditionwehaverevamped our main sections, bringing more exciting interviews and content. We highly recommend our top interview and CoverStory with global money market trader and consultant Satyajit Das, who openly reveals the dirty money tricks in the high world of finance and makes it easier for everyone of us to (finally!) understandtheglobalfinancial crisis in his acclaimed book, “Extreme Money”.
Also, we had the opportunity to chat with businessman and leadership practitioner and theorist Dr. Reuel Khoza. Read the interesting discussion in our BusinessWise section, touching on political and economical aspects of the African continent. We also have exciting practical advice on investments, business buying and selling, marketing and team building options. This is our best edition ever and we are looking forward to providing you with an exciting reading experience! We hope that our publication will inspire you to make every day, longlasting changes to a wealthier future. Wishing you all the best, Denisa Oosthuizen Mng Editor WealthWise magazine
Get In Touch
Contact us Email: denisa@wealthwisemag.co.za editor@wealthwisemag.co.za Mobile: +27(0)82 819 2820 +27(0)81 326 1579 Skype: denisa.oosthuizen Facebook: WealthWise magazine Twitter: @WealthWisemag LinkedIn: www.linkedin.com/company/wealthwise足magazine
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December/January 2012
Cover photo: Wall Street Sign (New York City) mypersonalphotoblog.wordpr ess.com Contributors: Leo Babauta, Andrew Newell, Geoff Blunt, Andrew Morton, Bob Power, Lisa Conlyn, Carla Rossouw, Johan Mouton, Denisa Oosthuizen Photos: dreamstime.com and contributor's photos where stated WealthWise magazine 5
Contributors
Andrew Newell
Geoff
Blount
is Chief Executive Officer at Cannon Asset Managers. After completing a BCom (Hons) at Wits, Geoff lectured Corporate Finance in the Wits business economics department.
Johan Mouton is the owner
In 2004 he joined Cannon Asset Managers in Johannesburg as head of group new business. He is involved in the development of relationships with high net worth clients, brokers and institutions.
He worked as a private足client portfolio manager at SGFP and BoE Private Bank before joining the Investment Solutions investment team and then continue his career in asset management at Cannon Asset Managers.
He has an Honours degree in marketing and has developed a marketing boost model to help companies increase their turnover by implementing and focusing on adequate marketing strategies.
Read Andrew's article (with Geoff Blunt) about valuing equities on the JSE in the MoneyWise section, page 28.
Read
is Head of Business Development at Cannon Asset Managers. He was previosly involved with Investec Asset Management, as a direct client investment consultant and advisor.
6 WealthWise magazine
Geoff's
article
about value stocks in our MoneyWise section, page 24.
and marketing specialist at Online Systems. He has been involved in marketing research projects, consulting work and developing people for business.
Read Part I of Johan's 18 GAP Marketing Turnover Boost Model in our BusinessWise section, page 40.
Contributors
Andrew
Morton is Managing Consultant at The HR Hub, South Africa’s first HR Service Centre, offering a number of HR products and services under one roof, covering the complete HR spectrum. Read his article about the purpose and value of team building in CareerWise section, page 47.
Lana Conlyn
Carla Rossouw is a Professional Conference Organiser based in South Africa. She writes reviews on Venues, Hotels and Restaurants as well as International Destinations. She regularly writes for our Agenda section reviews of fabulous places. Visit www.carlarossouw.com and read a review of the Garden Route holiday hot spots in Agenda section on page 53.
Bob Power
Bob wrote the article on due diligence in BusinessWise section, page 44.
is a writer, public speaker and life coach. Her anthology of poems ‘Am I Enough’ was nominated by the Academy Awards for English in 2009, she has been a frequent guest on Great Expectations with Sam Cowen and is a writer for The HR Hub. Read Lana's article about the loss of human connection in the workplace in CareerWise section, page 51.
is presently CEO of Power Corporate Consultants, specializing in security and management consulting, coaching and training in the M&A spectrum and assistance for the SME market.
WealthWise magazine 7
CoverStory
Extreme Money
Risk, shock and devastating truths in the world of high finance by Denisa Oosthuizen
O
nce upon a time society built things. "We engineered beautiful objects and created authentic goods. Now this real industrial engineeringhasbeenreplaced by financial engineering: shuffling money in an endless process of debt, trading and speculation. It’s enabled vast fortunes to be made for a few, while the risk was carried by ordinary people (…)”.
This is how the world we live in would be described today, from an honest, objective and shocking perspective few can really understand. And this is how the world of finance and its global domination is pictured by bestselling author, consultant and internationally respected expert in finance with over 30 years experience in 8 WealthWise magazine
"I didn’t know it at the time but I was getting into what would be the biggest game in money markets for the next 30 years"
global money markets Satyajit Das, in his best selling title “Extreme Money”. Satyajit Das, himself an insider of the global finance, having previously worked for giants Citicorp Investment Bank and Merrill Lynch, delivers a
true fascinating journey into the spectacular and dangerous money games and the elite who plays these games, namely the “Masters of the Universe”, representing the crème de la crème of the high finance: elite bankers, financiers and traders. In an interview with WealthWise magazine, Satyajit Das discusses the misfortunes and flaws of the world of high finance, the debt and speculation that fueled the global financial crisis and how powerful money games impacted on society as a whole. WealthWise magazine: What attracted you to the world of high finance and global money markets in the first place?
Picture: WallStreet in New York City, where the socalled "Masters of the Universe" continue to play dangerous money games Satyajit Das: I never set out to have career in high finance. I trained in law and accounting. To finance my studies, I used to work part time in an amusement park, which meant working every Friday night and all weekend. That’s hard when you are young. The Commonwealth Bank, then owned by the Australian government, offered me a scholarship to study on the condition that I worked for them after graduation. So, I supposed it was greed that got me into finance. But it was serendipity. I found I was suited to the world of banking. Very early on,
around 1977, as markets for derivatives the term hadn’t been invented, they called it futures and options were beginning, the bank was looking for people in that area. I had studied something called the Black Scholes option pricing model in a course at university and I bluffed my way in. They gave me a job.
I didn’t know it at the time but I was getting into what would be the biggest game in money markets for the next 30 years. I suppose it was an accident – a happy one. So my career tracks the rise of high finance in the modern world so much for careful career planning!
WealthWise magazine: What motivated you to write “Extreme Money”, given your background as a financier?
Satyajit Das: In 2006, I published Traders, Guns and Money which anticipated developments in the financial crisis accurately. That same year, I gave a speech entitled The Coming Great Credit Crash. Like Cassandra, I tried to draw attention in vain to the issues that threatened the global financial system. What happened is now, of course, history. And we are far from a resolution – as the comedian Lily Tomlin stated: "It’s going to get much worse before it gets WealthWise magazine 9
worse". There are many books about the global financial crisis, but they are mostly written by journalists, concerned with a specific event or narrative, or academics interested in theoretical aspects of developments. Or they focus on the US or a particular set of players. They are fragments which miss the complex mosaic of the last 3040 years. I wanted to create a complete picture of how we got to this point. With 30+ years at the coal face of modern finance which coincides with the rise of financialisation, I wanted to bring the reality of what had happened to the attention of the world.
Melville's Moby Dick, the omniscient narrator who witnesses Captain Ahab's monomaniac search for the great white whale. I have tried to trace the epic search of modern times for growth, wealth and prosperity through financial means. The world needed to understand what goes on in this world for better or worse. Unless people understand how high finance operated and its effects on the world, then there was no way we could reform it properly and preserve the useful elements. Of course, it’s made me a renegade. I guess bankers won’t want to be seen with me anymore.
In Extreme Money, I tried to create a honest, faithful and definitive cultural history of high finance. But I wanted it to be readable and accessible to everyone who was interested, not just financiers. I wanted to lift the veil and secrecy, penetrate the dense jargon to show the bones and circulatory system that underlies this key driver of the world. I wanted also to place finance clearly in the broader social context, drawing on other areas such as politics, philosophy, sciences, art and popular culture.
"Nothing happened, except we all dressed up. The same bastards are in control, the same people are running everything. It’s exactly the same"
One reviewer flatteringly referred to me as Ishmael, the narrator in Herman
interview
10 WealthWise magazine
John Lennon, in a 1970
WealthWise magazine: How do you want average people to relate to it? Satyajit Das: I want people to be empowered. Isn’t knowledge and truth the best antidote to power? Extreme Money will help people understand how these games and attendant cult of risk changed the world. Most people’s livelihoods are now vulnerable. Their savings andretirementmoniesarenow less secure than ever before. They don’t know whether they will be able to retire. They are worried about their children’s education, their future. People may like to read it if they want to know how we got here and if they can do anything about it. They can get some power back. WealthWisemagazine:Can you outline what the book covers and its unique message? Satyajit Das: Extreme Money traces the story of how finance the "monetary shadow of real things" – came to dominate global society and lives. It reveals the spectacular, lurid and dangerous money games that generated fake growth, Ponzi Prosperity and transient wealth. It has a Prologue (Hubris) and Epilogue (Nemesis) based on personal encounters using fictionalized real incidents to setupthethemesandnarrative around which the book is
constructed. There are twenty three chapters focused around five major themes. Faith looks at the money economy and financialisation of individual lives, businesses, even countries. It looks at the role of banks. It even looks at the financial media. Financial TV is probably the world’s longest running and most lively reality show.
wizardry underlying private equity, securitisation, derivatives and hedge funds. Alchemy originally referred to magical powers, traditionally associated with transmuting base metals into gold. In the modern world, financial alchemy used debt, risk and financial engineering to try to createaneraofendlessgrowth. Neither worked of course.
or whoever isn’t running it. Cracks looks at how the game of “passtheparcel” came to its eventual end and the mess it has left behind.
Fundamentalismdescribesthe liturgy of economics and finance, which was developed by Los CeeCaGo Boys at the University of Chicago. Most of it doesn’t work, but don’t try to tell them that. They have Nobel Prizes, you see! Alchemy explainsthefinancialtricksand
Oligarchy looks at the financial system and financiers, especially “financial groupthink”, the deep, shared interest and beliefs that shape the Masters of the Universe, the powerful, dominant class who runs world at least when Paris Hilton or Lindsay Lohan
WealthWise magazine: In summary, what were the most significant faults that triggered the global financial crisis?
I don’t like the idea of a simple message. But if there is one, the message is that finance as a driver of economic growth and prosperity is unsustainable.
Satyajit Das: Debt and speculation are not the right basis for building sustainable
Picture: Satyajit Das has worked for the 'sell side' at CitiCorp Investment Bank and Merrill Lynch and the 'buy side' as treasurer of the TNT Group WealthWise magazine 11
economies. We have too much debt. We fell in love with finance; financial engineering replaced real engineering and illusions replaced reality. Financiers used clever tricks to disguise risk to manufacture illusory wealth from thin air and lies. We allowed lives, businesses, entire countries to became financialised. We placed our faith on money, risk and "financial shadows", following false gods, false prophets. We believed in highly mathematical models which quantified risk to 16 decimal places, so we thought we could control risk – which is really controlling the future. We also trusted a financial oligrachy a powerful coalition of financiers, business interests, regulators and politicians – and allowed them to shape the world. But the Masters of the Universe were too smart, too fast, too greedy, too self absorbed— and far too dangerous. WealthWise magazine: How are these money games impacting on the savings, retirements and investments of the average person? The question is: should we trust banks and financial institutions with our money? Satyajit Das: It impacts everybody. It’s all done with your money, the money you deposit in the bank and your savings that are designed to 12 WealthWise magazine
provide for your needs. And of course when things go wrong, it is ordinary people who pay the cost. When times are good, financiers are capitalists and privatise the gains (its called performance linked pay bonuses). When things go wrong, their politics change and they like to socialise the losses. There is wonderful line in F. Scott Fitzgerald’s The GreatGatsbythatcapturesthis when Nick, the narrator, describes the rich: “…It was all very careless and confused….they smashed up things and creatures and then retreatedbackintotheirmoney or their vast carelessness, or whatever it was that kept them together, and let other people clean up the mess…” But you are right it is about trust. Paul Seabright, a professor of economics, identified traits that underpin systems of trust including money and banking the capacity to weigh up the costs and benefits of trusting others andtheinstincttoreturnfavors in kind or seek revenge when trust is betrayed. When it is working well, the system enables strangers to deal with each other safely. This fragile trust is at risk of failing. If we can’t restore this, then we have a serious problem. WealthWise magazine: In your opinion, would it be possible to “de financialise” the global society and restore the pre credit crunch order?
Satyajit Das: It’s not about going back to 2007. I think we have to go back to an earlier periodwhenfinancesupported the real economy – innovation, productivity, meeting needs for goods and services, new markets. That is going to be terribly difficult. We are addictedtotheideaofuniversal wealth and prosperity engineered by financial alchemy. There is no simple, painless solution. The world has to reduce debt, shrink the financial part of the economy and change the destructive incentivestructuresinfinance. Individuals in developed countries have to save more and spend less. Companies have to go back to real engineering. Governments have to balance their books better. Banks cannot be larger than nations, countries in themselves. Countries cannot rely on debt and speculation for prosperity. The world must live within its means. Reforming the economy, reining in extreme money is not difficult, but comes with shortterm painful costs and longertermslowergrowthand lower living standards. Unpopular and politically untenable tradeoffs mean that policymakers prefer the path ofleastresistance,committing more money to restoring the status quo using public debt to prop up the system, absorbing private losses and slowing the reduction in debt.
I hope we can go back? But as DomCobb(playedbyLeonardo DiCaprio) observes in the film Inception: "[an idea] is the hardest virus to kill". WealthWise magazine: In your opinion, how would you describe the future of the financial world? Satyajit Das: That’s an interesting question. We have to go back to dull and boring finance. Matching savers and borrowers, providing safe payment mechanisms and providing simple tools for managing risk. It’s a world that Jimmy Stewart’s character who runs a community bank in the film It’s a Wonderful Life would recognise. It’s not glamorous, but that’s what we need to go back to. The problem is the Masters of the Universe don’t want it and they are very powerful. WealthWise magazine: How would you comment on the recent street manifestation “Occupy WallStreet/the 99% movement” against financial greed and corruption, debt and consumerism? Satyajit Das: It is part of the backlash against financialisation and the loss of trust. There is a widening gap between the views and concerns of the electorate and the political and bureaucratic classes threaten the fragile
compact at the heart of free societies. You see it in the decline in the electoral support of major parties and the rise of smaller parties like America’ Tea Party, Germany’s Pirate party, France’s resurgent far right and Finland’s True Finns. Movements like Occupy Wall Street (“OWS”) and organised protests in Greece, Spain and Italy, as well as increasing union activism are fuelled by this breakdown in trust. But the agendas are not clear. It is clear that the existing system is deeply flawed. It is also important to have a clear ideaofwhatmusttakeitsplace. That hasn’t happened. Some of OWS protestors were there because they felt cheated – they had studied hard, worked hard and now had a lot debt and couldn’t find jobs that they thought were their entitlement. The motivation of some is that they haven’t got what they thought they deserved, rather than reformation of the structure. It reminds me of the 1960s. I recall John Lennon saying in a 1970 interview: “nothing happened, except we all dressed up. The same bastards are in control, the same people are running everything. It’s exactly the same.” We have to find “the financial balance” – in terms of growth, consumption versus saving, income equality between different parts of society and countries, managing the environment and conserving nonrenewable resources.
"It’s notaboutgoing backto2007. I think we have to go back to an earlier period when finance supported the real economy – innovation, productivity, meeting needs for goods and services, new markets" In seeking to resolve the crisis, the world must not destroy the trust that is central to modern societiesorrisksocial,political, international, as well as economic breakdown. Yet, policymakers seem barely to acknowledge these issues or be prepared to address them. WealthWisemagazine: How can people get empowered and achieve wealth and financial freedom in today’s world? Satyajit Das: People delegate responsibility for money very willingly. Woody WealthWise magazine 13
Picture: New Yorkers are taking the streets to protest against financial greed and corruption in the globally widespread protest movement, "Occupy Wall Street"
Allen has this wonderfully accurate line: “financial advisors will give you investment advise until you have nothing left to invest.” The most important thing is to take charge. You can’t rely on others. So education is a key. But not only in finance, just generally. Self reliance that’s always the key. Infinancialterms,youwillhave to save more – governments won’t be able to provide the services – healthcare and education that they once did. Sogettingthebalancebetween consumption and saving is important. You need to reduce debt. You will need to get accustomed to lower returns 14 WealthWise magazine
and higher volatility for the foreseeable future. In investments, you need to heed the advice of American comedian Will Rogers: “it’s the return of my capital not the return on my capital”. There has to be emphasis on capital preservation and income (dividends and interest) rather than on capital gains. It is going to be a challenging time, but very interesting. WealthWisemagazine:Any particular message for our African readership? Satyajit Das: Africa generally is less financialised. It would be good to avoid the errors of the path that some developed
countries have taken and build a different economy, based on real goods and services. That is the opportunity and the challenge. Read a review of "Extreme Money The Masters of The Universe and The Cult of Risk" in our Books section, page 62.
LifeWise
The No New Gifts Holiday Challenge by Leo Babauta
A
re you ready to participate in the mad shopping frenzy that we partake in every year, not only on Black Friday but all holiday season long? Are you ready for an incredible burst of spending, for racking up credit card debt, for the stress of buying things for everyone on your list? Are you ready to consume an insane amount of resources, to have a huge impact on the environment, to work long hours to pay for all that?
It’s the holiday season again, and with it comes the worst season for consumerism ever. I say, let’s opt out this time. My family and I are issuing a challenge to all my wonderful readers and to the world: The No New Gifts Holiday Challenge.
What is this crazy challenge? It’s simple: Buy no new gifts during the holidays. Wait, whaaat? Don’t fret, there are alternatives: • Make gifts, like crafts or construction type gifts. • Bake or cook consumable gifts like cookies. • Give the gift of your service — wash cars, give a massage, babysit, clean a house, mow lawns, etc. • Buy used gifts at thrift stores. • Donate to charity, as a group. • Volunteer at a charity together. • Have a shared experience together. • Create something, together, instead of consuming. • Give to others things you don’t need anymore • Find gratitude for what we already have.
Areyouin?Takethechallenge! It’ll be fun, you’ll save a ton of money, and your family will get creative. Read on.
The Tradition Traditions
of
Many people will say they love giving gifts. It’s a tradition, after all! Well, sure. But new traditions can be made if the old ones aren’t working out. And I’d argue the tradition of buying gifts is broken. Do we really want to teach our children that giving is really all about buying? Do we want to teach them that to show love,youmustbuysomething? Do we want to set an example of consumerism instead of creativity? Are we saying that the only way a family or friends can get together is if we spend a crapload of needless money? WealthWise magazine 15
Picture: Join your children by baking together Christmas cookies or have fun with your partner by baking together
No. Let’s be more creative. Let’s create new traditions. What kind of traditions? What if families got together and played games? Built things? Went outdoors to hike, play games, swim, play in the snow, camp out? What if families taught each other how to make things?
What if families got together to help others? Volunteer at a soup kitchen, help others build houses, clean up a neighborhood? Show that giving can be amazing, but it doesn’t have to involve consumerism. Get creative. Get healthy. Get constructive. Get compassionate.
What about the sales? All the money I’ll save! I think already,
you but
know this it’s worth
16 WealthWise magazine
reminding ourselves that when you shop during a sale, you aren’t saving money. You are spending it. The best way to save money is by not buying at all.
Sure, there are some necessities that we need, but holiday sales are not about necessities. They’re about convincing you that all these TVs, iPads, Kindle Fires, iPods, video game systems, clothes, power tools and more are necessities. You can’t escape buying all this stuff, because it’s Christmas, dammit! So come down and save some money, and sign up for store credit while you’re at it. When retailers offer you a major sale, this is a good time to run in the other
direction. They’re trying to trick you into buying something you don’t need. When you see an advertisement for something, anything, it’s a good time to shut off whatever you’re watching, or go to another website. You don’t need it. Opt out of Black Friday, at the very least.
"Sure, there are some necessities that we all need, but holiday sales are not about necessities"
But E my family won’t! Firstly, your whole family doesn’t have to do this. Just you. You’ll be an oddball, and some people won’t understand, but you’ll be leadingbyexample.Sendthem a link to this post, and tell them Leo made you do it. Just because everyone else is doing massiveconsumerism,doesn’t mean you have to.
problems with the way things have been done. These holidays weren’t always about massive shopping. What did people do before department stores and malls and online retailers? How did they ever survive? Let’s try to remember.
" These holidays weren’t always about massive
Secondly,don’tbefatalist.Your family might be willing to change, if you at least start the discussion. Again, send a link to this post. Ask them what they think. Challenge them to get creative.
Dealing with Difficult People
This could save your family thousands of dollars, and be incredibly gratifying in the process. Instead of spending hours of shopping apart from each other, you could be spendinghourstogether,doing things. Celebrate the holidays in a simple way. Talk about the benefits of changing, and the
Some friends or family members absolutely won’t join you. That’s OK. You don’t need to force this on anyone. Remember that everyone will change at their own pace, and not everyone will embrace changes like this. They’ll feel threatened, or criticized. You need to try not to come off as
www.
shopping"
critical of others, but more positive. Tell them that they are not required to join you, but that you want to do this for your own sanity. You are trying to save money, but mostly you want to move away from consumerism. Ask only that they respect this. Others might insist on getting you presents. Politely ask that they don’t, but if they do, don’t be ungrateful. It can be awkward—foryearsI’veasked family not to buy me presents, only to have some of them buy me stuff anyway. I don’t buy them anything, so it’s weird. But these days I just smile, and say thank you, and appreciate the effort. In the meantime,youcanstillsuggest starting other traditions, like playing games or going outside or volunteering. Be patient. Others don’t like to be forced into change, so just be the change you want to see in the world.
.co.za WealthWise magazine 17
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MoneyWise
How to avoid the holiday credit card meltdown by Denisa Oosthuizen
I
n writing this article, I have tried to overlook the Christmas shopping frenzy we all partake in to a certain limit and come up with useful advice on putting the brakestoyourcreditcardcrisis (read: more unwanted debt), fueled by emotional spending and the “silly season” itself. Most of this advice is common sense and should make you rethink your holiday habits. The approaching holidays are areasonforjoyandhappiness, celebrating and partying, which often translates into a carefree attitude towards money and spending. These holidays, rather try to innovate and stretch your holiday budget to accommodate your wish list without the extra cash or credit need.
Where to start? The first thing to do is to devise a holiday budget and stick to it. The budget should include money allocated to presents, Christmas and New Year parties, holiday accommodation if going away, wining and dining, souvenirs, transport and fuel costs, including toll gates fees. Allow an extra 5 to 10% for the unexpected, but only use the extra amount if it’s absolutely necessary (as to include an unexpected rise in fuel prices, for example). It is recommended to have a holiday budget before December kicks in, but if you have not already saved in the course of the year
towardsyourdeservedholiday break, start by using a percentage of your salary or apercentageofyourChristmas bonus or 13th cheque, if any. Don’t blow all your bonus money on the holiday itself or you might run into trouble when starting the New Year. Rather use a percentage, say 50%, to put the money aside and invest in a high interest account, for example.
But I must buy lots of gifts! Next step is to finetune the gift budget. Because family and friends gatherings are popular at this time of the year and gifting has been a long time tradition, it is easy to go over the top and spend more than you want to for fabulous presents. Make a list with the close people you want to offer WealthWise magazine 21
Picture: Give presents to your close family and friends, but don't go OTT gifts, such as your parents, brothers and sisters, your partner, your best friend. Be specific and don’t try to pleaseeveryoneyouknowwith expensive gifts, otherwise you’ll run out of money. For work colleagues, rather give inexpensive Christmas cards or share chocolates at the office. Cards work well with distant family members like cousins or those childhood friends you are still in touch with. The rule here is to stick to a predefined list of names to give gifts to, and keep courteous calls wishing “Happy Holidays!” to the others. Sometimes a phone call is all it takes to spread the joy of Christmas. 22 WealthWise magazine
Decide how much you can afford to spend, on average, for each person on your list (be realistic) and don’t forget to include the costs of cards, ribbons, paper bags or wrapping paper in your budget. When shopping for gifts, use the cash and don’t take the credit cards with you to avoid temptation!
"Sometimes a phone call is all it takes to spread the joy of Christmas."
Also, try and get inventive and creative by recycling or giving away good quality
items you no longer want or need any more to friends who will appreciate this. This will save you loads of cash if properly done. Most importantly, don’t compete with others when gifting. Give your presents or wishes from your heart and don’t always expect to receive something similar back. If some people are in deep financial trouble, tell them that you don’t expect anything back and spare them from the added financial stress.
Beating the social craze Holidays are a perfect time to get in touch with your friends and family. Socializing is great but it can mean disaster for your wallet.
Devise a separate budget for dining or drinking out as part of your holiday budget. Socializing needn’t be an expensive affair. Be creative and think about picnic lunches, the occasional cocktail or homecooked meals at home with the family. Go out with only a set amount of cash in your pocket and enjoy the experience. Don’t only look at cheap options though, make sure you include at least a lavish meal to treat yourself. Key rule: don’t go OTT. If you are attending quite a lot of parties and events towards the end of the year, reinvent your look rather than buying expensive outfits every time for each occasion. Pair up the same outfit with different accessories for day and night. To stay out of trouble and away from the cash bar, bring only cash to parties. Remember to have fun without hurting your wallet!
Money stress-free travelling
The biggest chunk of your holiday budget is the travelling and accommodation budget. Choose a less expensive location or accommodation, that you can afford. Don’t max out your credit card limit by desperately wanting to spend your holidays in Bahamas when you can have a similar, less expensive option like Mauritius. Don’t assume that everyone will be going away and flying internationally to have a blast. There are various
options around home, in South Africa and other African countries and sometimes less cheaper, but still enjoyable.
ontheroads.Takeintoaccount insurance and liability cover as roads can be unpredictable, especially during holidays.
If you’re flying, use your credit card to pay online for a better air fare. Other than that, don’t rely on your credit card to pay for all your vacation indulgence. Do talk to your bank and authorize the payments you would be made overseas to avoid potential fraud issues. Set limits to your holiday spending concerning souvenir shopping, dining out, fun activities, transport at the location and so on. To avoid stress, don’t go into much detail, but stick to your overall budget nonetheless.
When choosing your holiday accommodation, also look out for allinclusive options (including meals and fun activities) or discounted travel deals (try groupon.co.za, ubuntudeals.co.za or colectivecow.co.za) to save money. Make sure you are aware of other options not includedinthepriceanddevise extra cash for that, if you can afford it and it is within your budget.
"Socializing is great but it can mean disaster for your wallet"
If you are travelling by car, budget for fuel expenses, toll gates and the occasional stops for a snack on the road. There arevariousreasonstocutdown costs and have fun within your budget:chooseasmaller,fuel efficient car for the holidays rather than a heavy fueled SUV (if possible) or carpool if you aregoingwithagroupoffriends on holidays and share the fuel costs. The best advice to consider is to make sure you don’t go into trouble with your car and service it before going
Start saving for 201 2
Whatever you choose to do these holidays, make sure you don’t start 2012 with an empty wallet and feeling guilty about it. Holidays are for fun and enjoyment and if you know that your choices will trigger financial stress and more debt afterwards, rather don’t make that choice and go for a less cheaper, stressfree option. To start 2012 in a better financial mood, start a saving account if you don’t already have one and transfer some moneyeverymonth.Youcould also use part of your Christmas bonus to add to the saving efforts. In time, the savings should be enough to cover for your next holiday, but trust us: you will want to keep the money in there for a while and reward yourself beyond your wildest dreams when you decide you absolutely must! WealthWise magazine 23
MoneyWise
Have Investors Capitulated Against Value? by Geoff Blunt
I
n considering the drivers of investment returns in recent times, it surprises many investors to discover that, from a style perspective, the South African equity market has been in a strong growth cycle for the last five years. In many respects it doesn’t seem like this because “growth” is normally associated with euphoric markets. However, in the recent past, demandinglypriced growth stocks have performed well – becoming even more expensive – while the market has ignored or sold down attractivelypriced value stocks. This phenomenon also playedoutintherecentmarket volatility. In previous research, we have demonstrated this by 24 WealthWise magazine
examining the Cyclical Adjusted Price Earnings Ratio (CAPE) as a measure of value. But what about using the traditional trailing oneyear Price Earnings Ratio (PE) to measure value, and how have low PE stocks done over recent years? To examine this, we divided counters in the market into PE quintiles at the start of each year, where quintile one is the basket of lowest PE stocks (value stocks), and quintile five is the basket of highest PE stocks (growth stocks) and then track each basket’s performance relative to the market From research based on data from 1975 to date, we know that, globally, over fiveyear rolling periods, quintile one stocks enjoy an average 9.8%
p.a. performance premium over the market, and quintile five stocks typically underperform the market by 4.7% p.a. In other words, there is a significant investment premium that value stocks deliver whilst, historically, growth stocks, by nature, disappoint investors. However, since 2005 the exact opposite has taken place in South Africa, where quintile one has underperformed the market each year (as shown in Figure 1). This implies that investors in the South African market have consistently shunned low PE shares over the past six years. When we conduct this analysis using pricetobook ratios or dividend yields (other common metrics for value stocks), it tells a similar story,
contrary to longer term experience. As evidence of this, on average, quintile one highdividend yield stocks have underperformed the market by 3.2% per annum since 2005, whilst quintile one low price to book stocks have underperformed the market by a substantial 11.0% per annum, over the same period. History has shown that quintile one priceto book stocks normally enjoy a 7% p.a. premium over quintile five high priceto book stocks over five year rolling periods.
The implications for investors in South Africa
This recent market behaviour is nothing short of staggering and has some significant implications for investors. Firstly, it is not sustainable, and therefore deep value shares currently present incredible opportunities for investors who are willing to shop in unpopular areas of the market. Secondly, we believe that most investors, including many that define themselves as value investors, have given up on value shares and migrated or drifted to growth, or more expensive shares which is where the momentum has been. This is evident in research undertaken earlier this year by independent research
house Morningstar in their Style Box™ style plot analysis of equity unit trust funds in South Africa. The results are summarised in Table 1. To be overweight a style, a portfolio must have more than a 33% weighting to it. The average general equity unit trust is strongly underweight value stocks, at weight to core (shares that are neither value nor growth) and dramatically overweight growth stocks. Astoundingly, the value category analysis shows the average value fund is underweight value and amazingly, is overweight growth. This is clear evidence of style drift. By
Figure 1: PE Quintiles and Subsequent Performance (EquiWeighted Portfolio)
WealthWise magazine 25
constrant, the Cannon Equity Fund is rated by Morningstar as the purest value fund available with the highest value attributes and the lowest growth attributes. This analysis also showed that amazingly among all the asset managers in South Africa, there are only two equity unit trusts that are overweight value. As the performance of investment styles is cyclical, the temptation to “style time� the market is very high. At Cannon, we believe that it is incredibly difficult to successfully rotate the investment style of a portfolio. Evidence indicates that style rotation actually subtracts value, as the rotation is normally done after the fact and often too late. Another risk for investors is style drift where the portfolio slowly migrates it characteristics over time. The danger here is that the
investor believes they have bought certain attributes in a manager’s portfolio, only to find that the portfolio no longer owns them, normally only after those attributes start rewarding investors and it is too late.
As you can see from Table 2, our portfolios continue to enjoy strong valuation discounts to the market as shown in the first three metrics. But it is not just about buying shares on low ratings.
investors(...)
As a proxy for quality, the Return On Equity (ROE) of our holdings is higher than that of the market, indicating that the shares we own are more profitable than the average in the market. And finally, as a proxy for expected returns, we use broker consensus Earnings Per Share growth forecasts. Not only do the shares we own enjoy a discount to the market, offer greater quality but they also look set to grow earnings ahead of that of the market. We believe that these attributes in our portfolio are a powerful combination that do and will handsomely reward patient investors over time.
" Most
have given up on value
shares and
migrated or
drifted towards growth, or more
expensive shares"
Table 1: Morningstar Style Scores for various Equity Unit Trust sectors 26 WealthWise magazine
In analysing asset manager performance, investors need to assess the extent to which a manager’s performance deviates from their stated objectives and approach to investing. In other words, does the manager’s shape of performance match what they set out to achieve or what you expect them to achieve? If a value manager performs well in growth style markets, it indicates a problem. If the manager is doing exactly what he intended to do, then the investor is getting the type of portfolio that he has chosen and the performance that has been achieved is a result of manager skill and quality rather than luck. Luck can directions: manager investment
work in both by selecting a based on his skill, an investor
is less likely to be exposed to nasty surprises. This is of particular importance if an investor is blending different styles, investment approaches and philosophies. When investing with a particular manager, you want to know that you will get the type of fund performance and attributes that you have chosen. Investors first need to seek an asset management company that is consistently applying its investment philosophy and process and then to look for one that shows superior performance traits. Through this discipline, luck is removed from the investment process and true investment skill is embedded.
"When investing with a particular manager, you want to know that you will get the type of fund performance and attributes that you have chosen"
Note: cannonassets.co.za provides Morningstar’s detailed analysis.
Table 2: Current Attributes of our Houseview Equity Portfolio WealthWise magazine 27
MoneyWise
How to value equities on JSE
Is the growth story running out of road? by Andrew Nevell and Geoff Blunt
O
ver the last few years, expensively priced growth shares on the JSE have become more expensive while undemandingpriced value shares have become increasingly attractive. So whiletheexuberancenormally associated with growth style markets is lacking, these are the shares that have been outperforming.Thisiscreating incredible opportunities for investors that are willing to look in unpopular areas of the market, which have been further accentuated by the recent market fall.
Using cyclicallyadjusted price earnings ratios to value equities 28 WealthWise magazine
While oneyear trailing price earnings ratios (PEs) are a good measure of value, the cyclicallyadjusted price earnings (CAPE) ratio even better reflects a company’s underlying value. This is because the CAPE ratio uses sevenyear, or throughthe cycle, earnings of a company in the denominator of the PE multiple. In so doing, the CAPE ratio removes the noisiness of volatility in a company’s earnings. This high volatility of one year earnings growth for the JSE All Share Index is shown in Figure 1 and is compared to the sevenyear earnings growth of the market. The lessvolatile cyclically adjusted (seven year) earnings are more representative of the intrinsic or “DNA” earnings capability
of a market, industry or company. Given the relative stability of this throughthe cycle earnings number, the resultant CAPE ratio (current Price over Cyclically Adjusted Earnings) is not unduly impacted by shortterm economic influences, industry disruptions or windfall gains or shortlived setbacks in earnings. This renders the CAPE ratio an excellent valuation tool. We can also see from Figure 1 that the lessvolatile seven year earnings growth has turned the corner and started to show a higher level of growth, while the oneyear earnings growth has galloped ahead. This is a traditional signal that there is an underlying trend is towards higher levels of earnings growth.
Figure 1: Earnings Profile over One Year and Seven Years (Inflation Adjusted) Source: Johannesburg Stock Exchange, McGregor BFA, Cannon Asset Managers
The market’s current average CAPE is 13.7 times, which is 15% lower than the historical longterm average or valuation threshold of 16 times, or where it sat just before the recent pull back. This makes the market as a whole appear attractive. However, of even greater interest is the rising dispersion of valuations across stocks within the market in the recent past, which is creating even more compelling investment opportunities as well as presenting notable specific risks.
CAPE dispersions at the share level have risen over the last few years These rising differences expensive or
valuation between attractively
priced shares is in part explained by the exceptionally loose global monetary policy, embodied in the two phases of quantitative easing (QE) in the United States. Specifically, QE has resulted in mispricing the cost of capital which, in turn, has pushed up asset prices and created speculative bubbles in some pockets, rather than stimulate the real economy as intended.
Evidence of mispriced capital causing bubbles is overwhelming, and includes the technology bubble of the late 1990s being bolstered by Y2Krelated monetary easing; 9/11related monetary easing inciting the global property bubble; the commodity price spike that followed from the initial
policy responses to the US property bubble bursting; and recent QE causing the global sovereign debt bubble, China and India’s equity and property bubbles and the bubble in parts of the technology sector (especially social networking stocks).
In this vein, in South Africa, speculative or easy money has chased larger firms that are big enough for foreigners to be active in. These capital pools have also pursued anything linked to the Chinese or African growth stories or stocks with high earnings growth forecasts related to a “good story”. History, however, teaches us that rosy forecasts by investors very seldom materialise. WealthWise magazine 29
To evidence the extent of the domestic pricing anomaly that has materialised, Figure 2 shows the CAPE ratio for selected counters as of 12 August, with those shown in red being considered overpriced relative to the market average of 13.7 times, and those in green being underpriced. Over the last few years, as already足expensive shares have risen in price and underpriced shares have become less足demandingly priced, the slope of this curve has steepened, thereby rewarding growth investment strategies and punishing value strategies. In considering Figure 2, it is also worth noting how demanding the valuation multiples have become on some of the currently足popular companies. While many are
goodbusinesses,investorsare overpaying for these companies but appear to have forgotten that the easiest way to turn a great business into a bad investment is to overpay for the company. No matter how good the story, most of these highly rated popular shares will ultimately disappoint investors.
"The easiest way to turn a great business into a bad investment is to overpay for the company" Another way to measure the
extent of the mispricing in the market is to examine the difference between low and high CAPE stocks or market valuation dispersion. An easy way to do this is to compare the CAPE of the bottom quintile (value stocks) to the CAPE of the top quintile (growth stocks), as shown in Figure 3. By way of explanation 20% of stocks on the JSE are on CAPE ratios lower than the green line and 20% of stocks are on CAPE ratios higher than the black line. As Figure 3 illustrates, the difference between the bottom and top quintiles has widened from 11.9 to 13.5 since December 2008. This widening is characteristic of a growth market, with expensive stocks becoming even more expensive. This result is not sustainable. As
Figure 2: Current Examples of CAPE Ratios on the JSE Source: McGregor BFA, Cannon Asset Managers (2011)
30 WealthWise magazine
Figure 3: The Widening Dispersion across CAPE Ratios on the JSE Source: McGregor BFA, Cannon Asset Managers (2011) we know from experience and events, at some point growth becomes exhausted as investors are disappointed by the inability of even the best足 run firms to sustain aggressive expansion. It is at this juncture that the exceptional opportunity resident in value stocks becomes recognised by the broader market, with the resultant performance that makes deep value the best performing investment strategy over time. However, most investors do nothavethepatiencetoremain loyal to the strategy long enough to reap the rewards and either get enticed into seductive growth stories or try and style rotate, all the more easy considering that buying out of favour value stocks is emotionally incredibly difficult to do.
Against this backdrop, whilst the domestic equity market has reversed much of the initial deep damage inflicted by the global financial crisis, much of the running has been done by growth stocks that have become increasingly expensive. By contrast, value stocks have been overlooked, and this presents exceptional opportunity in an environment where equities are becoming increasingly attractively priced. Specifically, whilst many of the well足loved growth stocks represent well足run South African companies, current multiples are extremely demanding.
gratification. By contrast, value stocks that have been widely overlooked in South Africa since 2007 present exceptional investment prospects for investors who know that this time is never different. AndrewNewellandGeoffBlunt are Head of Business Development and CEO, respectively, at Cannon Asset Management. Cannon Asset Managersisanicheinvestment managementcompany,based on the philosophy and principles of value investing. Visit the website www.cannonassets.co.za for more details.
In short, the growth cohort represents poor investment prospectsandhighrisktothose who are unable to delay WealthWise magazine 31
BusinessWise
Attuned Leadership
Lessons on African humanism in leadership by Denisa Oosthuizen
T
he past decade has been incremental for a number of discussions around the concept of leadership and whatmakesagoodleadership. In his latest book, thinker, businessman, director and public speaker Dr. Reuel J. Khoza has reopened the debate on leadership and good governance, introducing the concept of “attuned leadership”, portraying a leader attuned to his or her followers through empathy, compassion, integrity and humility. Based on the African humanism concept of Ubuntu, as articulated in the Zulu proverb “umuntu ngumuntu nagabantu”, meaning “a person is a person because of others”, the concept of “attuned
32 WealthWise magazine
leadership" follows a groundbreaking work on leadership, the values of African humanism and the connection between corporate vision, business and community spirit in his previous writing, “Let Africa Lead", subtitled African Transformational Leadership for 21st Century Business”. In “Attuned Leadership”, the reflective discussion of leadershipandtransformation continues with the direction for an ethical leadership in bothAfricanandglobalcontext for businesses, politics and governments. Both a practitioner and theorist in the field of African leadership, Dr. Khozaansweredourquestions about the current political and economicsceneofSouthAfrica and the continent, the lessons
weshouldlearnfromtheglobal crisis and how can attuned leadershipmakeadeepimpact in today’s world. WealthWise magazine: What was the biggest motivation behind writing “Attuned Leadership” and how do you want it to be perceived in the current political and economical context on the continent? Dr. Reuel Khoza: The main realization was that most of the leaders in South Africa and on the continent tend to drift away from the people they are supposed to lead and become what I have called “leaders in limbo”, especially because they lack a deep sense of their history, where they come from and where they are now, and very importantly, because they lost touch with the needs
Dr. Reuel Khoza: It would be idealistically for everyone to voice his or her opinion in companies with thousands of employees. As a leader one does have a sphere of influence, amongst those who he or she works closely with. There should be consultations involved. In South Africa on its way towards democracy, the wisdom keepers of the time went ahead to negotiate and made sure they achieved a consensus. Before one can take a major position on a Picture: Dr. Reuel Khoza decision, there must be a believed in a leadership attuned to the needs of its consensus. Let’s take an example preceding the days people of democracy in South Africa. ofthepeopleandthewaythese Those who were people want to be led. representing the party ANC, for argument’s sake, went “Attuned Leadership” is my back to the wisdom keepers humble contribution to what I to consult with them. I am believe it is happening now in referring here to people like South Africa and the rest of Nelson Mandela, Walter the continent and hopefully Sisulu, Govan Mbeki who the world can learn something were not necessarily sitting from the principles which I at the tables. The delegates humbly submit in the book, confronted with the principles which are ethically, negotiations realized voting valuebased and have an would be possible since they universal appeal. There must outnumber the rest and be a compelling vision for could stand a chance to win leaders to lead their people, their argument as in the but they must also depart from Western world, where the a solid base of good values. majority wins, but the wisdom keepers were in WealthWise magazine: favour of continuing the One of the most important negotiating process and aspects of attuned achieving at minimum leadership is participation. sufficient consensus. If one How can participation be achieves sufficient accomplished in today’s consensus, this is enough. business environment?
"There is no case of the winner takes it all, there is always something left on the table for the counterparties to take away" The question now is what is sufficient consensus and this is a matter of opinion. It is about achieving the buyin of the majority of the people and making sure even the ones left out have something to take away. There is no case of the winner takes it all, there is always something left on the table for the counterparties to take away. WealthWise magazine: How can attuned leadership make a difference in African politics? Can you comment on the past and present leaders in Africa: Thabo Mbeki, President Jacob Zuma, Julius Malema, Robert Mugabe, Gaddafi? Are the current WealthWise magazine 33
manifestations and revolutions in Africa a manifest for a new kind of leadership – ethical and holistic? Dr. Reuel Khoza: What triggered the purpose of this book was former President Mbeki in the wake of the Polokwane conference in 2007. I was among his advisors on his Presidential Economic Advisory panel at that time and my observation was that his leadership was falling apart under forces working heavily against him. I have advised for establishing consultation to defuse the negative forces and gather sufficient support to continue his leading. His response was that his entourage didn’t really understand how ANC works. Mbeki is a good listener of input coming in the form of data and information, but when it comes to taking advice he is not very flexible. My argument there, as it is now, was that a good leader should listen to both data and information, as well as seriously consider recommendations, which are interpretations of the situation from someone else’s vantage point. I am suggesting that in today’s world leaders have to deal with complexity. Therefore one cannot suppose he or she understands everything. Good leaders also have blind 34 WealthWise magazine
spots. Let your followership help you reduce those blind spots so that you have the full spectrum of the situation, to take the kind of action you need to take.
globalization and where should South Africa stands in terms of the forces that drive globalization among China, India, South America and so on.
With regards to SA President Jacob Zuma, I was asked to comment on the issue of whether he was up to the challenge as the country’s leader. I said, let’s rather look at the kind of criteria that any leader of a complex political and economical environment such as South Africa should actually have.
Also, a good leader should posses moral authority based on ethical behaviour, translating in doing the things that are wholesome for humanity as opposed to selfserving actions, corruption and greed. Moral authority in leadership means caring for humanity, a respect for the followership and its welfare. In brief, the current leadership stacks up poorly against those criteria.
"A sound leadership should go beyond platitude and slogans and lead by example" Such a leader must be able to deal with complexity, must understand a political economy. Such a leader should not be just a political leader, he or she must provide for the followership. In the 21st century we live in an increasingly globalised environment. Such leader should understand
In the early pages of “Attuned Leadership”, I specify that “Leaders are not just born to the role. They are born, then made – and sometimes unmade by their own actions. A leader who is not attuned to his or her followers soon becomes a leader in limbo and invariably then fails”. Where ANC Youth League’s president Julius Malema is concerned, he has been cast ashore of being put in a leadership position by a wave of populism. Emerging leaders should be elected on the basis of objective sound criteria. One could be born with leadership qualities, but hasn’t taken the time to develop these qualities and this I believe to be the case with Malema.
Picture: Achieving consesus. A sound leadership should go beyond platitude and slogans and lead by example. If one plunders and behaves in a manner that is actually selfserving and selfenriching, he or she is not leading, but misleading. The recent manifestations against dictatorial leadership on the African continent in countries such as Egypt and Lybia show that we are now dealing with an informed followership. An informed followership will not accord its leadership carte blanche. If people’s welfare is threatened, the followership will step in a manner as to rise against a dictator. What we call the Arab Spring was a reaction to politics of oppression and dominance
by the wealthy and mighty referred as the “plutocracy”. One has to provide the kind of leadership that accommodates people’s feelings, thoughts and a variety of opinions before arriving at the line of action. WealthWise magazine: How is African leadership different from the Western world? What can be taken from both worlds to construct a new face of leadership for the 21st century? Dr. Reuel Khoza: The point of departure is a contradictory discussion with my mentor and an anecdote I have also included in the book. I used to affirm that I believe in a participatory leadership. He called me
aside one day and said “Khoza, business is not a democracy”. I replied “If it is not democracy, then what is it?”. In my humble opinion, the opposite of democracy is autocracy. One cannot be an autocratic leader in a complex environment. In a simplistic environment, one can actually be dominant. In a complex environment, you have to lead people. To that extent, I believe a business is a democracy. It should be participative, collaborative and cooperative, otherwise it crumbles. My mentor replied “You must think a lot harder than feel”. He cited Western philosopher, Rene Descartes,“I think, therefore I am” in opposition to “I am because you are, you are because we are”, which was silly in his opinion. WealthWise magazine 35
My understanding is that, as human beings, we are a relational species and we all live in a relationship matrix. The African philosophy is much deeper than Descartes’ philosophy acclaiming that the empty citadels of one’s ego can influence the world. The African approach to leadership seeks to be participative and inclusive to a much greater extent. The manifestation of the failure of the Western way of doing things is what we are seeing now with the Wall Street demonstrations. People are feeling excluded. Some voices have argued for stakeholder management, meaning that instead of focusing purely on shareholders, one must take into account the wishes and aspirations of stakeholders, which is a very wide spectrum comprising of employees, media, NGOs and so on. Leaders must make sure that employees have a sense of the leadership of the organization. Other manifestations of the failure of the Western approach, such as the global financial meltdown of 2008/2009 whose consequences are still present worldwide, had to do with those in leadership positions looking up to themselves and allowing greed to take the better of 36 WealthWise magazine
them. Even as one rewards talent and good performance, one should never allow greed to take charge. WealthWise magazine: Are you totally opposed to the way the Western world thinks? Dr. Reuel Khoza: I am a man of two worlds. I do have an African worldview at the world which I assimilated by way of a process of enculturation, which means assimilating aspects of culture from your own culture. At the same time, I have assimilated other aspects from Western culture, through a process called acculturation, meaning assimilating aspects of culture from a foreign culture. I have received a Western schooling and education. My upbringing was eclectic, therefore I cannot dismiss Western culture completely, and otherwise I would be lying to myself. We have to develop an eclectic culture that takes the best in the Western culture and the best of African culture and leaves the worst behind. In Western culture, I admire the degree to which personal performance is rewarded. The way of incentivizing good performance and innovation has to be tempered by the
fact that whoever innovates and performs, it does so in a social context. Whatever one does, I would suggest adopting the view expressed in these words: “If you succeed, lift as you rise”. This is what Africa can bring to the table. In Western culture, although this view is somewhat present, individualism is nourished and encouraged to an unhealthy degree. Collectivism in African culture is also nourished and encouraged to a specific degree. What I am suggesting is to strike a balance between collective existence and individual expression in the context of society. WealthWise magazine: What are the current biggest threats to humanism, as portrayed by the African Ubuntu philosophy? Dr. Reuel Khoza: The African Ubuntu philosophy tends to be abused. One of the biggest pillars of African humanism is the respect for the elders. I agree with the respect given to the elders, but in my opinion, this should not lead to showing this respect at all costs and blindly. The elder’s wisdom has to be owned and prone to develop in an evolving context. African cultures respect the people who are in authority. This respect
accorded to authority figures is often abused and used to dominate. Other voices have emerged to good effect, pointing out some of the faults of the elders who insist to be respected. It should be in fact not a respect at all cost, but a respect to wholesome leadership and wholesome wisdom. In African humanism, the values like sharing, caring, respect, hospitality are not without flaws or immune to abusage. WealthWise magazine: Is the Western world open to “Ubuntu” or is the concept misunderstood? Dr. Reuel Khoza: There’s a plethora of writings on
African humanism. The concept of Ubuntu is given ascendancy even in studies at Harvard University, where a number of articles have been released on participative managements and the merits of accommodation of opinion. Thought leaders and researches are starting to believe in a collective approach to solve the problems of humanity as opposed to individualistic domineering approaches. WealthWise magazine: What should we learn from the 2008/2009 global economic crisis and current recession, in terms of leadership? Dr. Reuel Khoza: Besides
what we discussed above, I would like to emphasize here the difference between a “servant” leadership and “atyourservice” leadership. My observation is that we have to cultivate such “at yourservice” leadership. Leaders should be “at service” as opposed to just being servants and taking someone else’s bids. As such a leader, one is getting rewarded, but not inadvertently rewarded. What we see in the Western culture is a big rewarding gap between CEOs, the managing level and those at the bottom, allowed to be manifested in greed. We should not refrain from rewarding, but achieve a healthy balance. Let this be
Picture: Johannesburg's skyline, South Africa. The "city of gold" combines its proud African heritage with the Western world of business and high finance WealthWise magazine 37
something we should actually discuss between organized labour and corporate leadership, between individuals at the bottom and those who are at the pinnacle. Let’s discuss and arrive at a wholesome level that people will buy into. WealthWise magazine: How do you see the future of leadership in Africa? Are we doing our best to cultivate the leadership Africa needs? Dr. Reuel Khoza: Not so long ago, if you look back at the majority of African states, people assumed a presidential or leadership position by way of a coup or other forms of manipulation which were less than democratic. Lately, the majority of African states (I believe 30 out of 54) are in fact headed by Presidents who were chosen by forms of elections. This suggests that democracy is taking route in Africa. This is my first observation. The second observation is something the European Union introduced a couple of years back, The African Peer Review Mechanism (APRM), which meant to monitor the behaviour amongst African leaders. It does have its flaws, but as an Institution, it offers a very good introduction of democracy in practice.
Niall Brown
The third element of a very positive development on the continent is the number of African leadership programs and initiatives that have taken routes at youth and adult level, some totally indigenous to the continent. In South Africa, to give a few examples, there is Thabo Mbeki’s African Leadership Initiative (jointly with UNISA). Other initiative is run by reputable businessman and Chairman Isaac Shongwe, in coordination with the Aspen Institute in US, which has produced over 300 graduates who are now proudly honing their leadership skills in media, corporate South Africa and professions. There is also the African Leadership Programme started by NEPAD Business Foundation, in partnership with GIBS. All initiatives give credence to my assertions in the introduction of the book that “leaders are not just born to the role, they are made” and these programs help to make good leaders. With the emergence of this, once we reach critical mass, Africa would be lead by good leaders. I think we are leading to critical mass. WealthWise magazine: What would be your first responsibilities assuming that, hypothetically, you were to be elected the President of South Africa?
Dr. Reuel Khoza: It’s an unfounded supposition, as I won’t be, but assuming so, even though I have my own interpretation and analysis of what is happening in South Africa at the moment, as a country leader I would work hard to develop a common analysis of where we are as a nation. Having done that, I would then work hard with my fellow South Africans to develop a common sense of destiny that would serve to inform my vision. I would then gather the support of the citizenry. I would then proceed to inculcate a culture of thinking generationally, just like Asian cultures do, but then I would indigenize this process. I would stand for a participative culture that could lead me to making sure that both education and health were where they should be. Where job creation is concerned, I would not actually create jobs, because I believe that jobs have huge limitations. I would foster and nourish an entrepreneurship culture, and in the wake of that, many jobs would be created. I would also make sure that various organs of society, governments, businesses of all sizes and NGOs collaborate in tackling the challenges of our time.
WealthWise magazine 39
BusinessWise
The 1 8 GAP Marketing Turnover Boost Model Part I
by Johan Mouton
O
ne of the biggest challenges for business is time. There are only so many hours in a day and we need to spend them wisely. Running a business becomes a full time occupation, taking every bit of effort and dedication from you, the business owner. All businesses consist of three main parts, in this order: Marketing and Sales: If there are no sales and no marketing, then there will be no clients, so there is no business. Operations: If you are not able to deliver on the service or product, there is no business. Administration:
If
your
40 WealthWise magazine
administration is not in order, on the administrative and then there is no business. operational part of the business. This ensures that In most small and medium the products and services are businesses, the responsibility up to standard. of the business owner is to do everything. This includes Variousmeasurementsareput marketing, sales, deliveries, in place to ensure these orders, client services, products and services are accounting, administration, delivered according to client finances, and still running the needs. Some go as far as to business. use statistical models to ensure conformance. Highly successful people have learned that the moment you However, marketing is usually are the business, then there not a process. It is done ad足 is no business. If the business hoc. It is not measured. goes home at night then you The business commissioned are in trouble. designers to develop an and that Thesehighlysuccessfulpeople advertisement have learned to build a advertisement is used until business around processes余 the business owner gets tired processes that support all the of it. Another designer is called and a new marketing piece is functions of the business. made in the hope that this one Many businesses focus a lot will bring in the money.
The 1 8 GAP Marketing Turnover Boost Model The 18 Gap Marketing Turnover Boost Model focuses on getting your marketing automated and getting the right processes in place for your business to conduct effective and efficient marketing. These marketing processes ensure that your business is using marketing to its full potential. The model comprises of four sections, as seen in Figure 1. The first section is the foundation. You will not be able to implement strategies without a strong foundation. The foundation sets the level of success.
It is generally agreed that there are three ways to grow a business. 1) The first and most obvious is getting more clients. 2) The second and not so obvious is getting more frequent purchases. 3) Finally, getting clients to make bigger purchases.
" If the business goes home at
night then you are in trouble"
The model follows a gap approach. This means that if you are doing a certain activity then you have closed a gap. Therefore, the model looks for certain
activities余 if these activities are not done, then there is a gap in your marketing process. It is always important to consider the financial aspect when involved in marketing. Let us look at an example. If your business currently has 1000 clients, buying twice a year and spending R100 per transaction, you will have a turnover of R 200.000 (Figure 2). If we improved each of these aspects with only 20%, then your turnover will have increased with more than 72% (Figure 3). Very important, to achieve the above results, your marketing foundation in your business must be right.
Figure 1: The four sections of the 18 GAP Marketing Turnover Boost Model
WealthWise magazine 41
Figure 2: Example of a current situation of a company's turnover
Figure 3: Example of an improved situation with a net effect of 72% boost As mentioned earlier, if the foundation is not strong then you will not be as successful. In the following sections we will be looking at each of the four fundamentals of the Marketing Turnover Boost Programme. Another area of improvement is improving operations余 the way you do things in your business. Improving operations expands your profit margins. Expanding profit margins increases cash in your pocket. With more cash in your pocket, you are able to invest more. When you combine operational improvement with increased sales, you are effectively turbo 42 WealthWise magazine
boosting your business余 making giant leaps in profit building and cash generation. Improving operations and marketing is illustrated in Figure 4.
It is extremely important to keep great accounting records. This ensures your business obtains the value it deserves. When the day comes to sell your business; you will know you are getting the best price for it. If your business does not have accurate records, you are driving in the dark with no lights on! A business is required to follow a systematic process to achieve all the above. In the following sections the focus will be on a logical route to get to your desired results.
Foundation (GAP 1 -1 5) The foundation sets the groundwork for the strategies. This foundation needs to be working and in place. The foundation lays out the structure and processes for all of your marketing efforts. According to the model there are 15 Gaps or areas in the foundation. Gap 1: Cost Per Client. It is extremely important to determine the cost to obtain one additional client. This will enable you to develop highly creative marketing strategies that will baffle the competition. Cost per client is fundamental in marketing.
Figure 4: Improving operations and marketing This aspects assists with establishing what marketing aspects are working and which are not. Gap 2: Marketing Measurements. For every marketing campaign and marketing activities you require to measure the effectiveness of the campaign. Gap 3: Training. There is a lot of power in training. Most big businesses are using training to develop a competitive advantage. It is important to note that training needs to be formally documented. Also, the training must cover the three aspects of your business (marketing and sales, operations and administration)
Gap 4: Systematic Marketing and Sales. This gap addresses constant marketing activities. In order to be successful at marketing a business is required to establish sound continuous marketing activities. Gap 5: Testing Marketing. This gap is overlooked by many businesses. Before launching a full campaign it is required to test the marketing message and medium first. Gap 6: Unique Selling Proposition (USP). The USP is one of the most critical aspects for marketing in a business. This is what makes a business different to
competitors. The USP could be one aspect or many, depending on the business. Gap 7: Feature, Advantage, Benefit. People buy benefits. By closing this gap the business truly understand the reason clients are spending money with them. Gap 8: Who is your ideal client? By understanding this you will be able to create more effective marketing strategies. The ideal client can be defined in various ways. There could also be more than one ideal client. To be continued with Part II in our upcoming February/March 2012 issue of WealthWise magazine. WealthWise magazine 43
BusinessWise
What is Due Dilligence?
Investigating a business buyout by Bob Power
T
his article is written from the standard position of the perspective of a buyer acquiring a small/medium sized business. However, in recent years there has been much emphasis on a seller’s due diligence on a buyer, to satisfy the seller that the buyer is really a buyer and can afford to pay the price. Due diligence is the process whereby the buyer satisfies himself that he is in fact buying what the seller states he is selling. It is an investigation (not an audit) of a potential acquisition to confirm to the buyer’s satisfaction whether tocarryonwiththetransaction or withdraw (walk away). Theextendoftheinvestigation depends on the size of the 44 WealthWise magazine
"For the small to medium deals the investigation can be more complex than bigger deals, hence the need for the buyer to dig deep" transaction, and regrettably for the small to medium deals the investigation can be more complex than bigger deals because of poor corporate governance(TheKing3Report indicates that small businesses must also conform
to corporate governance requirementsdirectors conditions are being carefully looked at), lack of legal compliance, poor accounting and administration systems and often taking short cuts with the tax man, hence the need for the buyer to dig deep. Following the principle of keepingitsimpleandpractical, theareaswhichgenerallyneed specific attention, understanding and if necessary clarity, usually centre on the following topics: 1. Financial health of the business • Are the financial statements accurate and up to date? Go back three years, but, it must be stressed that you are going forward not backwards –what is the business going to make in the future?
• To ascertain potential benefits and liabilities: is it a declining market? • Is the business solvent? • Is there a positive cash flow, guaranteed monthly income is the prize.
• How can the buyer increase the revenue and profits of the business and merge them with its own?
2.Stock and assets • Is stock in a sellable condition? • What is the condition and real value of the assets? This is an area which needs careful consideration, sometimes the values are way out of market rates and unrealistic. Importantly, always watch depreciation.
4. Threats • What are the business risks, is there new technology which can make the business redundant? • A clear understanding of the industry to be entered and importantly who are the competitors? • What is the future of the business and its competition? • What is the image and reputation of the business?
3. Opportunities • Ascertaining opportunities which are available. No surprises.
5. Human resources • The ongoing commitment of employees, are they motivated?
• How strong are the sales and marketing departments? • What is the accountability and transparency of owners, directors and management? • How effective is the businesses planning? • What are the salary levels? • Are there any restraints of trade? • What are the pension rights and terms in the employee’s contract (especially notice periods)? 6. Legal aspects • Will contracts remain in place after the change of ownership? • Is the business legally and financially compliant? • Are there legal cases pending which could affect the image and financial
Picture: Sealing the business deal WealthWise magazine 45
stability of the business? • Verification of all the claims made by the owners and management. 7. Terms and conditions • What are the price and payment terms and how are they justified? Tax is an area whichneedsspecificattention. • Are there other offers on the table, don’t get caught in an auction, get a commitment from the seller that during the due diligence investigation, he will not negotiate with other parties. 8. Communication • Assessing all the findings from all the participants, lawyers and accountants etc. to ensure that there is a clear picture of the business from all angles. This is often an area where, because of lack of communication, the buyer does not get a comprehensive picture of the business and as a consequence makes a wrong decision. • Why is the business for sale? If the answer is not clear, walk away. It is important to take the stance that “the seller will tell the truth, the whole truth and anything but the truth”. He will not disclose “any skeletons in the cupboard” The buyer must find them himself. It is stated that the investigation can be frustrating, time consuming and expensive, but the buyer 46 WealthWise magazine
puts himself at peril if he does not do his homework. The use of outside advisers is often necessary, but can be expensive. Therefore, ensure that they have extensive experience.
" Why is the
business for sale? If the
answer is not clear, walk away"
Use “Men, not boys” –i.e. those who have the experience and knowledge for the business at hand. Don’t be penny wise and pound foolish. However, ensure that your agreement with the professional adviser is in writing, setting out what he is to do, for how much and when will delivery be made. To elaborate on the above the following points are relevant: • The legal investigation is to satisfy the buyer that the legal affairs of the business are in order, especially ownership of assets. • That the business complies with statutory requirements and is compliant and that the main contracts affecting the business are in order. The major components of the
financial investigation centre on: • Comparing budgets with actual • Are forecasts realistic • Checking business trends, and importantly • The quality of the accounting systems. Check that there have been no auditor’s qualifications; they can be a deal breaker (circumstances whicharesoseriousastoaffect a significant difference from the transaction so as to make the buyer uncomfortable with concluding it). Attheendoftheday,ifanything is found which is negative, this factor can be used to negotiate a reduction in the purchase price. As stated previously, don’t be rushed, only fools rush in… It is no use being wise after the event. Checking first avoids problems later. Bob Power is presently CEO of Power Corporate Consultants. Visit the company's website www.powerconsulting.co .za for more info. This article was comissioned on behalf of Optima, a global specialist provider of training and expert support to small and medium enterprises (SMEs). Visit the website www.optima.mu for more information.
CareerWise
The Team-Building Debate by Andrew Morton
I
n an organizational world that is dynamic, ever changing, challenging and constrained, there are many questions and debates that have been raised around team development, team building and team bonding. It is a critical consideration before you embark on such a journey, to ensure that organizations are doing the right thing, at the right time, in the right way. In an effort to demystify a couple of misconceptions, we’d like to highlight a few points that are not only relevant,butpertinenttoteam success and optimal productivity.
There is a difference between a mob and a team – just because a bunch of people
arrive at the same time, at the same place to do the same thing does not mean they are a team. A team is a purposefully built group of people with a common focus – a synergy, a relationship, an understanding, a cohesion.
Now, teambuilding – it’s not purely a fun day out of the office where budgets are spent on menial activities that hold no outcome or sustainability. Teambuilding, in its true form, is a custombuilt intervention that is aligned to the team’s challenges, dynamics, culture and specified outcomes. Despite,various“funmasters” out there promoting teambuilding in the form of a fun day, there are some very serious experiential learning providers that are serious about creating “fun” whilst developing.
Before embarking on any such intervention, one should consider the following: • Is the provider accredited with a proven track record? • Does the provider offer a tailormade solution taking into consideration the specific needs and outcomes of the team, rather than a “sausage factory” type product? • Does the provider offer solutions that are sustainable and transferable back in the workplace? • Is the provider focused on a process of team development, rather than an in and out offering? • Does the provider engage withthetarget,understanding the culture, the objectives, the areas of development and the emotional intelligence of the team? WealthWise magazine 47
Picture: A team is a purposefully built group of people with a common focus – a synergy, a relationship, an understanding, a cohesion. These questions need to be answered and thought about in depth. This information ensures that the provider you select, is wellestablished and experienced in the field of true people and team development. Games do not change the team – they will be fun, yes, but where does the learning emerge? Games and activities combined with observation, briefing and debriefing by qualified facilitators ensures that learning and unpacking of concepts is not only understood but also transferred to the team to ensure that teams understand for themselves rather than being told what is good or bad. 48 WealthWise magazine
The art of team facilitation is critical to the success of the team intervention – so fully trained and experienced facilitators who understand the outcomes and objectives will make a huge impact on the success and sustainability of such a project. Now, team bonding vs team building! A huge difference? Yes, team bonding is an effort whereby people interact on a social level and enjoy a braai, a dinner, a get together. This should not be confused with the true nature of team building. Team building, in the bigger scheme of things, is seen as a ‘nicetohave”, but many organizations have suffered
the results of an operation that does not function at it’s best, an operation that is “flat”, an operation that if driven, improves. It is therefore safe to say that team building is not just a necessary inclusion in team development, but it is an imperative that if conducted correctly, can change the way a team functions. Are you managing a team? Take a minute and explore the dynamic of your team with these questions: 1. Does my team operate at the optimal level? 2. Does my team feel engaged, valued and open to contribution?
3. Are there challenges within the team – conflict, lack of understanding, lack of trust, unresolved diversity issues, blockages in communication? 4. Is the team new or has it experienced change in the last while? 5. Do I as the Manager need to get to know my team on a different level? 6. Do I require psychometric profiling within my team to create cohesion? 7. Is there a message my team needs to hear in a participative and engaging manner? 8. Does my team need to be reenergised, refocussed or reignited? 9. Do I need to build the EQ capability within my team?
10. Are there areas of development which exist in order to increase cooperation and therefore productivity? If you have answered yes to any of the questions, teambuilding might be that great opportunity to reignite the sparkle in your team.
"A team is a purposefully built group of people with a common focus "
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Picture: Team building is not only about fun games!
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WealthWise magazine 49
CareerWise
The Missing Link -
The Loss of Human Connection at the Office by Lana Conlyn
W
hen did we stop caring about the people we work for and with? Sure we say we care about our friends and family and yes we say that caring about people we work with expends a very precious resource, emotional energy. And when I refer to care, a patronising placatory comment is not showing that you care.
Have you ever considered the kind of working relationship you could have with someone if you really cared about them and let them know. Consider the possibility of sharing, really sharing yourself with the people you work with, what if you dropped your guard and let people in. I can hear your inner dialogue from where I sit “If I let them in, if I care, I make
myself vulnerable and open to being ridiculed, spoken about and gasp and horror, my reputation could be annihilated”. Yes, it would be true if were a shift that took place within one person, however just imagine for a moment if it were to filter through and everybody within an organisation operated from this kind of space? Maybe I’m living in a dream; however I really do believe that staff would be prepared to go the extra mile if they knew that the people they worked for had a real emotional investment in them? These days we work for more than just the salary in our bank account. Fact is with the onset of life coaching, spiritual awareness courses, sustainable business incentives; society has shifted
massively towards connecting on a real level. Work now has become something that needs to enrich and fulfil us on an entirely new level. Not to mention the fact that we work obscenely long hours, we spend more time with our fellow staff than we do with our families and loved ones. So please please tell me why are we not reaching out to these people that we share so much of our time with? Personally, I want to know about the people I work with, I don’t want my boss to be an anathema to me. I want to know that they crave a glass of good red wine for every one of the sixty minutes it takes them to get home in traffic. I want them to care about the fact that I hate having my two year old in my bed, but I don’t have the heart to throw him WealthWise magazine 51
Picture: Take a genuine interest in your work colleagues out because he’s just so cute and little. I want to know that Sally in accounting is looking at buying a new car and that the MD has sat down with her and made a couple of suggestions. Why can’t we care? Would it kill us, if our fellow staff knew what was going on in our lives? Fine, how sick am I of that word?! “How was your weekend?” “It was fine”, “Hey! Howareyoutoday?”“I’mfine”. Stop it! Just stop it, I want real, I want to know about you and I want you to know about me, if I know that someone is struggling, I’ll go the extra mile for them, I will move heaven and earth to ease their load. I’m not particularly religious, but I’m sure that in the bible
52 WealthWise magazine
it says do unto others and you would want done unto you. So ifyoudon’tcareaboutaperson, don’texpectthemtocareabout you and if you care, just perhaps they would care right back. You might find that staff would go beyond the call of duty for you. The possibility exists that productivity might gothroughtheroofandawhole new kind of community would be born, beyond just the commonality of a pay cheque at the end of the month. I don’t sell anything, I offer a thought process, a concept, a different way of thinking about things. And this is my new concept, care, go out there and care, approach your boss on a human level, they are after all human, just as human as the lady who cleans the
bathrooms in the office. I say push, be persistent, ask them how their weekend was, speak to them about a new restaurant you found. Let them know that you are more than just a person that answers the phone and types on the computer, you are more than an impressive sales figure, you are beyond the numbers you enter into an accounting software package, and return let them know that you are more than the person who signs their pay cheque, you are more than the person with the impressive office and the godlike demeanour. Go on, connect the dots and believe in the possibility of a connected humanity, at work and at home.
Donec at sem metus
Agenda Lifestyle
Holiday Guide to the Scenic Garden Route by Carla Rossouw
T
he Garden Route is one of South Africa’s most beautiful tourist areas and a coveted summer holiday destination for thousands of localandinternationalvisitors. GARTOUR, the official Garden Route Tourism Marketing Association and Associated Members (visit website www.gartour.co.za) promote both the Garden Route Coast and the Klein Karoo as a tourism paradise. Garden Route starts with Mossel Bay, approximately 380km South East of Cape Town and ends with the Storms River, approximately 230km South West of Port Elizabeth. This 175km of pristine coastline, which incorporates the inland area of Outshoorn (approx. 65km inland) and its surrounds,
Niall Brown
offers a multitude of attractions, from exquisite natural beauty to award winning accommodation, restaurants and activities for both young and old. With the holiday season just around the corner, we explore this beautiful area should you be holidaying on the Garden Route.
the R328 between Mossel Bay and Outshoorn. This family owned and managed inn, surrounded by mountains, offers comfortable accommodation, restaurant and a variety of outdoor activities including horse riding and hiking. Call +27(0)44 631 0000 or visit www.eightbells.co.za.
Mossel Bay and surrounds
Other than Mossel Bay, you can also visit Hartenbos, Great Brak River and Glentana for more swim, sun and sand options. For dining, head to Transkaroo Restaurant at Great Brak River, +27(0)44 620 4163.
Abeautifulseasidetowndating back to 1488, with a relaxing atmosphere and unspoilt beaches, Mossel Bay is a wonderful getaway. Stay at the Point Hotel, with beautiful ocean views of the Atlantic Ocean (call +27(0)44 691 3512 or visit www.pointhotel.co.za) or Eight Bells Mountain Inn, on
If you are the adventurous type, don’t miss the White Shark diving and viewing, White Shark Africa, +27(0)44 691 3796. WealthWise magazine 53
Picture: The gardens at Eight Bells Mountain Inn
Outshoorn and surrounds
Known as the ostrich capital of the world and surrounded by scenic mountains, one can only reach Outshoorn via the scenic Outiniqua or Montagu mountain passes or the extraordinary Meiringspoort (gateway through the mountains). Home to the annual Klein Karoo National Arts Festival (KKNK) in April, Outshoorn attracts visitors all year round and summers are wonderful to spoil your partner, family or friends. Enjoy the luxury tented accommodation of Buffelsdrift Game Lodge with bush safaris, guided nature
54 WealthWise magazine
walks, game viewing on horseback and elephant experience. The restaurant is open to the public. Call +27(0)44 272 0000 or visit www.buffelsdrift.com. Alternatively, book your stay at Housemartin Guest Lodge and Plough Restaurant in De Rust, a Victorian Manor House with 12 ensuite guest rooms and a wonderful swimming pool perfect for those hot summer months. Call +27(0)44 241 2214 or visit www.housemartin.co.za. A mustdo in Outshoorn is a visit to the very impressive Cango Caves (call +27(0)44 272 7410) or go to www.cangocaves.co.za). For a great holiday eatery,
make sure to pop in at Jemima’s Restaurant, +27(0)44 272 0808.
George and surrounds The commercial hub of the Garden Route with national airport and rail links, George has a laidback atmosphere. To enjoy your stay in style, consider Hyatt Regency Oubaai Golf Resort and Spa (call+27(0)44 851 0131 or go to their website www.oubaai.regency.hya tt.com) or Fancourt for accommodation, dining, spa and golf (call+27(0)44 804 0000 or visit the website www.fancourt.com). George’s surrounds are equally inviting. Herold’s Bay has great beaches and
Picture: Paragliding at Map of Africa, Wilderness
Picture: Tented accomodation at Buffelsdrift WealthWise magazine 55
Picture: View of Wilderness from lookout point
views, especially from Dutton’s Cove restaurant, with selfcatering and serviced villa accommodation (call +27(0)44 851 0155). Victoria Bay is a quaint, small but beautiful beach, great for surfing. For something different, indulge in South African fare with a Turkish twist at Kafe Serefe (call +27(0)44 884 1012 for bookings).
Wilderness There’s no better name to describe the unspoilt scenery of this piece of the Garden Route. Wilderness has astonishing views and is known as one of the best launch sites for paragliding in South Africa. 56 WealthWise magazine
For an exhilarating experience book a tandem paragliding flight with Cloudbase Paragliding at+27(0)44 877 1414, +27(0)82 777 8474 or jan@cludbase paragliding.co.za. Please note that this activity is very dependent on favourable weather and wind conditions. The lakes between Wilderness and Sedgefield offer beautiful scenery, with plenty of accommodation and restaurant options, which include Lake Pleasant (+27(0)44 349 2460), Groenvlei (+27(0)44 343 2368) and Pine Lake Marina (+27(0)44 343 2006).
The slow town of Sedgefield
Sedgefield is host to the Annual Slow Festival over the Easter weekend (go to www.slowfestival.co.za for more information). It is a nofuss holiday destination and a haven for art lovers. Visit the Wild Oats Community Farmers’ Market on Saturdays (call+27(0)44 883 1177 for more info) next to Scarab Village, open throughout the week with art and crafts, restaurant, deli, nursery and a handmade paper shop. Take it slow (literally!) by exploring Buffalo Bay, popular for a wellprotected beach, surfing or fishing. The more energetic
individuals can take a walk on the beach from Buffalo Bay to Brentononsea. The walk is beautiful and food for the soul. It is about 5 kilometres and takes approximately two hours at a comfortable pace. On the inland side, explore Rheenendal en route to Knysna, home to well known artists and crafters with some historic significance. Food lovers should indulge in great seafood at Chefs @ Nauticus Place Restaurant in Brentononsea (call +27(0)44 381 0106 for bookings), while thrill seekers are invited to try the great paragliding launch site on the ridge or at Gericke’s Point. Both these sites also offer great views of the ocean and lakes.
Knysna, the beautiful town and surrounds Situated on a natural estuary, Knysna is a quaint bustling town and a firm favourite amongst local and international travellers. Famous for its Annual Oyster Festival in July, a delectable celebration of oysters and champagne, Knysna is well worth a visit. Golf lovers will certainly feel at home at the magnificent Pezula Hotel and Golf Estate, with Zachary’s fine dining restaurant (call +27(0)44 302 3333 or go to www.pezula.com) or at Simola Hotel Country Club and Spa, with its Jack Nicklaus signature golf
course (call +27(0)44 302 9600 or see the website www.simolaestate.co.za). Other very interesting accommodation options are The Turbine boutique hotel and spa, on Thesen Island, an ingenious conversion from an old power station to an exquisite boutique hotel with two restaurant options (+27(0)44 302 5746 or visit www.turbinehotel.co.za) and The Rex Hotel, an elegant and sophisticated option in Gray street, just behind the Knysna Waterfront, with more shopping and dining options (+27(0)44 302 5900 or www.rexhotel.co.za). For a different kind of holiday memories, The Featherbed Company and Featherbed Eco Experience, includes ferries trips, a nature reserve which includes the rare Blue Duiker, luxury yachting and scheduled cruises, including paddle cruiser dining. Call +27(0)44 382 1693 or visit www.knysnafeatherbed.c om. If you want to experience Knysna Lagoon at your own pace, Lightleys holiday houseboats offers accommodation with no boating experience or skippers licence required. Call +27(0)44 386 0007 or www.houseboats.co.za. Ile de Pain (Island of Bread) Bakery and Bistro on Thesen Island, owned by Austrian pastry chef Markus Farbinger
and South African Chef, Liezie Mulder, has been treating guests to bistro style meals and delectable items from the bakery since 2002. Make sure to include this wonderful eatery on your list. Aside from heavenly oysters, baked goodies, luxury accommodation and amazing boating experiences, Knysna is home to the Knysna Elephant Park, which houses orphaned elephants in a freerange but controlled environment. The park offers daily tours, elephant rides or riding/walking safaris. Call +27(0)44 532 7732 or visit www.knysnaelephantpar k.co.za. Other activities to do in Knysna area are abseiling, kloofing, canoeing and sea kayaking through Eden Adventures (+27(0)83 628 8547) and helicopters flips and scenic flights with Civair(+27(0)44 876 0029) or Capri Helicopters (+27(0)82 749 9042).
Plettenberg Bay and Tsitsikamma
Famous for being one of the most spectacular holiday destinations in South Africa, Plettenberg Bay offers, amongst other things, 28 kilometres of unspoilt beaches. The Bay is also known as the gateway to Tsitsikamma(‘place of many waters’), with many adventure activities, including the world’s highest bungee jump. WealthWise magazine 57
Picture: View of beach from Restaurante Enrico
Picture: Entrance at Emily Moon 58 WealthWise magazine
Stay at the Emily Moon River Lodge anddine at Emily’s Restaurant (+27(0)44 533 2982 or visit the website www.emilymoon.co.za) or try good Italian fare with great ocean views at Ristorante Enrico at Keurbooms, +27(0)44 535 9818. Plettenberg Bay is also home to the Beacon Isle Hotel or BI as it is referred to by the locals, a well known landmark. The Beacon Isle will celebrate its 40th anniversary in 2012. Prior to 1972, the site was occupied by a whaling station, a boarding house and then a hotel. The old hotel was demolished to be rebuilt as The Beacon Isle Resort, part of the Southern Sun group of hotels. Between Knysna and Plettenberg Bay, Hunter Hotels are all family owned and run establishments and member of Relais and Chateaux, with two five star properties in this area, the beautiful Hunter’s Country House and Tsala Treetop Lodge. For central reservations, call +27(0)44 501 1112 or visit www.huntershotels.com.
Catch a ferry with Keurbooms River Ferries (+27(0)83 254 3551 or www.ferry.co.za), visit Old Nick Village for a variety of galleries and shops (+27(0)44 533 1395) or brave the 216 metres fall of Bloukrans Bungee operated by Face Adrenalin. Opened since 1989, it is the highest commercial bungee jump site in the world. Call +27(0)42 281 1458 or visit www.faceadrenalin.com for details.
Eden. These sanctuaries are situated at The Crags, just outside Plettenberg Bay towards Storms River. For more information call +27(0)44 534 8906 or +27 (0) 44 534 8145 and visit www.monkeyland.co.za, www.birdsofeden.co.za or www.elephantsanctuary.c o.za.
If bungee jumping is not your option, try the equally adventurous Tsitsikamma Canopy Tour (+27(0)42 281 1836) or Tsitsikamma Falls Adventure, with 8 spectacular zipline slides (+27(0)42 280 3770 or www.tsitsikammaadventu re.co.za). Storms River Adventures is another good option, with canopy tour, forest tour, hiking trails, together with local crafting and restaurant.
Carla Rossouw is a PCO (professional conference organiser) and freelance travel writer. Contact Carla on +27(0)82 453 8223, carla@carlarossouw.com or www.carlarossouw.com to discuss your conference, corporate or leisure travel requirements.
HAPPY HOLIDAYS! Photos courtesy Rossouw
of
Carla
A holiday to Plettenberg Bay and its surrounds is not complete without a visit to the Elephant Sanctuary, Monkeyland and Birds of
For more travel reviews, go to www.wealthwisemag.com. WealthWise magazine 59
Books
Steve Jobs by Walter Isaacson Little Brown, R270,00
T
uthor, biographer and former CNN Chairman and managing editor of Time magazine, Walter Isaacson was “charged” by Steve himself with the monumental task of writing an authentic and objective portrayal of Steve Jobs, the man dubbed an “icon” of his generation and a visionary in the technology realm. The biography, simplistically titled “Steve Jobs by Walter Isaacson” whose white and black cover, bearing his photo, reveals once more the minimalistic views of Jobs (and some might say his black or white attitude on everything), is probably one of the most fascinating biographies you can lay your hands on and, frankly, a historical and 60 WealthWise magazine
interestingcompendiumofthe personal computing era. Born in 1955, abandoned at birth and adopted by couple Paul and Clara Jobs, Steve grew feeling special in the neighborhoods of Mountain View and Palo Alto, California, putting himself at the intersection of art and technology in what will become the famous Silicon Valley”, where technologists, geeks and hippies coexisted in the 60s and 70s. A Reed
college dropout, Jobs would deepen his interest in technology, while at the time same pursuing his quest to Zen Buddhism, personal enlightenment, meditation, also fasting to clean his bodies and overcome his frustration related to his birth parents and adoption. This lead to him becoming a fierce vegetarian
and was a huge challenge during his battle with pancreatic cancer, a battle he unfortunately lost at age 56, in 2011. Having briefly worked at HP and Atari, two of the biggest technology companies in Palo Alto, Jobs would cofound Apple Computers with colleague and computer whizz Steve Wozniak and view himself “a product of the counterculture rather than the corporate culture” with a keen eye on details, graphics and simplified user experience, transforming the existing dull and geeky computer industry into an amazing experience in the ‘80s with Apple II computer and its first Macintosh. The rest is simply history. Steve’s biography not only confirms his genius at
creating fantastic products, but also serves as a portrayal of Steve as he really was, both a charming, but difficult personality. Reading his biographyisadualexperience: at times you start to grow on his preferences and ingeniousness; other times, you tend to revolt at his rudeness and arrogance. Readers are given a complete picture of the man who revolutionized no less than six industries: personal computer (Mac), animated movies (with Pixar, later bought by Disney), music (iTunes store and iPod), phones (iPhone), tablet computing and digital
publishing (iPad). Jobs harvested a passion for perfection, an incredible attention for detail, an obsession for Zenlike simplicity, a vision for revolutionary products with bold and simple design, and a world where hardware and software are interlinked to create a new way people relate to technology. He was also emotional, stubborn, impatient, arrogant and intolerant with those who couldn’t measure up to his command. His darker side was often described by co workers, employees and industry colleagues as his
“reality distortion field”. Countless episodes in his life, related in the book, serve as a confirmation of his contradictory persona. Steve Jobs might not have been the greatest friend, father, husband, business partner or CEO, but he was indisputably one of the greatest innovators and creators of his generation, or, as Walter Isaacson truthfully describes it, “a master of putting together ideas, art and technology in ways that invented the future”. There couldn’t have been a better conclusion to this fascinating, riveting read.
Timothy Ferriss, The 4-Hour Work Week Random House, R200,00
Author and entrepreneur Timothy Ferriss is the exponent of “lifestyle design” or mobile lifestyle, a concept that has become a worldwide phenomenon. Dedicated to all of us, from students to CEOs and entrepreneurs, ”The 4Hour Work Week” is an eyeopener to a different, new way of living. Based on the author’s personal life experience, the book is a comprehensive manifest of living the life of
your dreams, with countless suggestions from negotiating remote work, outsourcing your life, escaping the 9 to 5 work routine to experiencing firstclass world travel and more holidays, earning a monthly fivefigure income without the 80 working hours Liberation with great results. per week and joining the New Imagine you can eliminate half of your work in just 48 Rich. hours using the Pareto law, The author has devised a automate your cash flow and stepbystep, lifechanging have all three ingredients of process focusing on Definition a luxury lifestyle design: , Elimination, Automation and time, income and mobility. WealthWise magazine 61
It’s all possible and the book shows you exactly how to do that. Most importantly, the book advocates for a lifestyle of “living more and working less”, shunning the concept of retirement and saving for the future in favour of frequent miniretirements, reduced workload and a “live now”
attitude.Theexpandededition includes tested resources, recommendations and real success stories from readers worldwidethatwouldconvince even the most skeptical. If you do want to spend your lifetime doing the things you always wanted to do (how about that round the world trip?) while
still keeping your job or business and reduce your workload, Timothy Ferriss’s book is a must read. If you only want to buy a book this month, make it this one and prepare yourself for a life changingperspective–therest can wait.
Satysjit Das, Extreme Money - The Masters of the Universe and the Cult of Risk Pearson, R170,00
After his international bestseller Traders, Guns and Money, revealing an insider’s account on trading derivatives, author and recognized expert in financial derivatives, Satyajit Das returns with a highly controversial book, Extreme Money, an unprecedented true insider’s account of the high risk and high greed culture that has lead to global economic instability. The
book
exposes
the
62 WealthWise magazine
spectacular and dangerous money games invented by elite financiers in their quest for ever higher returns in an age of modern money, fake wealth and financial alchemy. Drawing from the author’s detailed knowledge in the world of extreme money and his over 30 years career as a derivatives trader, Extreme Money offers a true authentic and technically rich perspective of the global financial crisis and the events that lead to it.
Fascinating, shocking, disturbing and in the same time witty, candid and humorous, the book abounds in realworld anecdotes about the worlds’ most elite financiers and real events that occurred worldwide, detailing the financial engineering behind some of the most powerful institutions, banks and money funds (Merrill Lynch, AIG, Soc Gen, Citi to name a few) which resulted in their epic fall.
Both an informative and entertaining read, the book will appeal to a large spectrum of readers, irrespective of their knowledge of the financial world. Readers will be able to understand and learn more about the 21st century’s culture of risk, the new world economy and the masters of the universe, comprising of elite financiers, hedge fund managers, policy makers and regulator who continue to underwrite the risks of this dangerous endless shuffling of money, placing wealth in the hands of a small community of economic power, while the rest of the world has to live with the risks and
consequences of a flawed financial system. The author’s credentials and witty storytelling are an enough reason to pick up the book and let yourself absorbed in the lessons posed by the world of great finance. Himself anexpertinderivativestrading andriskmanagement,Dashas worked for the “sell side” at Citicorp Investment Bank and MerrillLynchandthe“buyside” as Treasurer of the TNT Group. He also plays an important role as a consultant, advising banks, investors, corporations, and central banks worldwide, most
importantly after he delivered a series of speeches in 2006,”The coming Credit Crash”,inwhichheanticipated many aspects of the coming Global Financial Crisis, exposing the risks of the credit markets. He was recently featured in Charles Ferguson’s 2010 Oscarwinning documentary Inside Job and continues to be a respected commentator on subsequent developments in the crisis. Arguablythebestbooktocome out of the financial crisis, Extreme Money won’t leave you indifferent.
Reuel J. Khoza, Attuned Leadership African Humanism as a Compass Penguin Books, R280,00
Both a practitioner and theorist in the field of African leadership, Dr. Reuel J. Khoza continues its reflective discussion of leadership started in his previous book, “Let Africa Lead” with the direction for an ethical leadership in both African and global context for businesses, politics and governments. His view is encapsulated in the new introduced the concept of “attuned leadership”. The
book
serves
as
a
compass for true, good, ethical leadership, based on the philosophical tradition of Africa, Ubuntu, and symbolizing African humanism. Ubuntu, as stemming from the Zulu proverb “Umuntu Ngumuntu Ngabantu”, means that a person is a person because of the other persons. Throughout his book, Dr. Khoza enforces the meaning of attuned leadership as a mutual relationship between leadership and followership,
individual and collective, interlinked with caring, compassion, empathy, integrity and effectiveness to bring thought and action together. The book should become an inspiration for today and tomorrow’s leaders on the African continent and worldwide. WealthWise magazine 63
Events
Top things to do and see these holidays by Denisa Oosthuizen
Picture: Don't miss Old Mutual's Carols by Candlelight on 9 December at the Pretoria Botanical Gardens
Holiday Concerts
Take a walk on the memory lane with Beatlemania on Tour and relive the classics of the 60s from 8 December to 15 January at Gold Reef City Casino, Johannesburg. Book tickets through www.computicket.com. Take your family and friends to the Piazza at Montecasino on 9 December to listen to the sounds of Carols by Candlelight, with Soweto Gospel Choir and others as entertainers. Go to www.montecasino.co.za for details. Entrance is free! 64 WealthWise magazine
Enjoy the Laborie Wine
Farm's annual Carols by Candlelight and Night Market on 9 December at the wine estate with live music, delicious picnic baskets and wine. Visit www.laboriewines.co.za for details. Get completely caught into the festive spirit at the Old Mutual Music in the Gardens Carols by Candlelight on 10 December at the Pretoria Botanical Gardens. Expect the best of traditional carols performed by the Mzansi Youth Choir, accompanied
by Irish pipes and drums. Book tickets through www.ticketbreak.co.za or pay at the door. What is Christmas without the 70s nostalgic tunes of Boney M? The band is back to South Africa these holidays and will perform their hits, including tracks from their legendary Christmas Album. Listen live to "Feliz Navidad" and "Little Drummer Boy" at Sun City on 16 December余 Carnival City on 17 December and Cape Town's GrandWest Casino on 20 December. Book your tickets at www.computicket.com.
Shows to watch The king of Irish comedy, Jimmy Carr is bringing his Laughter Theraphy Tour to South Africa. Catch him live on 8 December at Cape Town's GrandWest Casino and on 10 December at the Sandton Convention Center, Johannesburg. Book at www.computicket.com. There's no better time to watch the Christmas all足 favourite classic tale of Tchaikovski's The Nutcracker, this time performed by the Imperial Ice Stars (on ice!) from 8 December to 15 January at Montecasino in Johannesburg and from 19 January to 11 February at Cape Town's Artscape Theatre. Book through www.computicket.com. If you are on the Durban coast, catch an all South African cast acompanied by the KwaZulu足 Natal Philarmonc Orchestra in a magical remake of the clasic Cinderella story from 26 November to 31 December
at the Playhouse Opera Theatre or relish in the Snow White fairyale from 6 December to 8 January at the Elizabeth Sneddon Theatre. Book tickets at www.computicket.com.
Expos and markets Photographers, bloggers and camera lovers, don't miss the first ever Canon Expo in South Africa on 9 to 11 December at Sandton Convention Centre. Browse through the all Canon product range on show, learn photographic tricks from professionals and encourage your creativity in the cool photographic competition. Entrance is free! www.csaexpo.co.za. Indulge in special and affordable gifting at Irene Christmas Market on 10 December, an art and food outdoor market with tradition, heldon the grounds of the Smuts House Museum in Irene, Pretoria. The market will be open every Saturday in December. For more information visit
www.irenemarket.co.za. The South Coast Christmas Market at St Michaels on Sea, Main Beach in KwaZulu Natal will run from 10 to 30 December, with fabulous gifts and festive treats. Walk Cape Town Christmas Market, from 14 to 16 December at the Cape Waters Building, will include designer exhibition and goodies. Durbanville Night Market on 16 December, from 5pm to 10pm, will showcase festive gifts and live entertainment. On 11 and 18 December, don't miss the popular Kirstenbosch Craft Market, with a variety of arts and crafts and delicious food, plus a performance by The Parlotones on 11 December. For unique handmade gifts, try the Earth Fair Market on 24 and 31 December. Cape Town's Biggest Christmas Fair, from 16 to 23 December at Good Hope Centre, 10 am to 10pm, is a one足stop Christmas shopping destination. Happy Holidays! WealthWise magazine 65
Last Word
Lessons Learned by Denisa Oosthuizen
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his issue our book review section featuredsomeofthe most inspirational reads we have witnessed in a long time. Following the death founder and CEO of Apple, Steve Jobs, Walter Isaacson’s biography of the creative genius is an exciting read and abounds in life lessons we can all drawn from to a certain extent in our lives, careers and businesses. There were various lessons learned and comments shared online, most notably an interesting opinion of former chief evangelist at Apple, Guy Kawasaki in a column titled “What I have learned from Steve Jobs”. But the most important lesson to learn is from 66 WealthWise magazine
Steve Jobs himself and, not surprisingly, is centered on life and death. The following excerpt is extracted from Steve’s unusual commencement speech he gave in 2005 to a Stanford class:
“No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too
long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true. Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary”. Wouldn't the world be a better, happier place if we all followed his advice?
In next edition
February/March 201 2
Our personal growth edition!
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tart new year 2012 with inspirational advice on personal growth. Our February/March 2012 issue willbededicatedtoreinventing yourself, both in your personal life and career.
Let us make 201 2 your most phenomenal year yet!
Learnaboutconnectingtoyour authentic self, developing empathy and awakening the African inside you from our amazing interview with Barbara Nussbaum, author of "Personal Growth African Style". Improve your networking skills while discovering the real purpose of networking with our practical advice, learn the difference between mentorship and coaching and read all about mediating and avoiding conflicts in the workplace. WealthWise magazine 67